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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 2 TO
FORM 10
GENERAL FORM FOR
REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
ENTEX INFORMATION SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 93-133715291
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
6 INTERNATIONAL DRIVE, RYE BROOK, NEW YORK 10573-1058
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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COMPANY'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(914) 935-3600
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE.
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.0001 PAR VALUE
(TITLE OF CLASS)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
CERTAIN FORWARD-LOOKING INFORMATION
The information contained in this Registration Statement includes
forward-looking statements, including without limitation statements set forth in
the sections entitled "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in Item 2 of this
Registration Statement. Since this information is based on current expectations
which involve risks and uncertainties, actual results could differ materially
from those expressed in the forward-looking statements. Various important
factors known to ENTEX Information Services, Inc. that could cause such material
differences are identified in the section entitled "Business Factors" contained
in Item 1 of this Registration Statement. Certain sentences in this Registration
Statement have been identified as forward-looking statements. The reader is
cautioned that other sections and sentences not so identified may also contain
forward-looking statements.(1)
ITEM 1. BUSINESS
OVERVIEW
ENTEX Information Services, Inc. ("ENTEX" or the "Company") was formed in
August 1993 in a management-led buyout of the domestic information systems
business of JWP Inc. ("JWPIS"). ENTEX is a leading provider of personal computer
("PC") solutions to meet the distributed information technology systems and
end-user support requirements of Fortune 1000 companies and other large
enterprises. The Company's total PC management capabilities include acquisition
and procurement services and network, professional and other outsourcing service
support for the PC-based network environment. The proliferation of complex
client/server networks and the deployment of mission critical applications and
databases on these networks has made the effective management of distributed
information technology resources a top priority for many large enterprises.
Currently, client/server networks may consist of thousands of PCs connected to
hundreds of servers, linked to dozens of midrange or mainframe hosts, and
internetnetworked over multiple sites. Large enterprises are finding it
challenging and costly to support and manage these extensive distributed
environments.
PRODUCTS AND SERVICES
ENTEX's integrated array of acquisition and procurement services and
network and professional services and other outsourcing services address
customers' needs throughout the life cycle of their PC-based systems, beginning
with the design, specification and acquisition of hardware, software and network
products and extending through the support and eventual replacement of the
system (or elements of the system) with a new technology solution.
ACQUISITION AND PROCUREMENT SERVICES
The Company sells and distributes a wide variety of personal computer and
network products and peripherals, providing its customers with a single source
for all their PC product needs. Customers use the Company for product
procurement because ENTEX provides product availability, rapid system
configuration customized for individual users, and accurate and reliable product
shipment. The Company believes its customers improve their purchasing decisions
by leveraging the Company's extensive experience in evaluating products for
performance, reliability, ease of use and compatibility with other hardware and
software products. The Company also provides logistics management services,
which involve the coordination of product delivery, receipt and installation.
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(1)ENTEX and Solution Line are registered trademarks of the Company, and ENTEX
Information Services, Random Access and System Builder are trademarks of the
Company. This Registration Statement also includes trademarks of other companies
which are the property of their respective owners.
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To ensure product availability, the Company maintains a finished goods
inventory and build-to-order components at its Integration Center in Erlanger,
Kentucky, utilizes second source suppliers and participates with certain vendors
in their build-to-order programs. Using the Company's real-time inventory
management systems, ENTEX employees across the country can check on product
availability.
A majority of the PC systems shipped by ENTEX are customized to meet
customer specifications. The Company's configuration processes load and
configure operating systems, applications and proprietary software to customer
specifications. Through vendor build-to-order programs, ENTEX receives system
components from original equipment manufacturers and completes the manufacturing
process to a customer's specific requirements. ENTEX's configuration operations
have been ISO 9002 certified since August 1994.
Through ENTEX, customers may purchase application software either in
separate "shrink-wrapped" units or on a volume-licensed basis.
NETWORK, PROFESSIONAL AND OUTSOURCING SERVICES
ENTEX provides its customers with a broad array of services to enable them
to more effectively manage their distributed information technology systems.
These services include:
Network and Professional Services. The Company provides customers with
network design, implementation and integration services on a project basis. The
consulting services which the Company provides include design, installation and
upgrade of local-area, wide-area, and enterprise networks. The Company also
assists customers in the implementation of messaging and Internet/Intranet
technologies, provides comprehensive support to network managers and
administrators and assists customers with their network operating systems,
network-based applications and connectivity.
Migration Services. The Company provides a wide range of migration services
to assist customers in transitioning from one computing environment to another.
These migration services include Microsoft NT and BackOffice upgrades and
migrations; local area network migrations; desktop operating system migrations;
and messaging migrations.
Outsourcing Services. The Company provides customers with outsourcing
services under long and short term contracts. These services include many of the
network and professional services as well as the Company's core support
services, including network implementation, operation and support; warranty
services; help desk services; deskside support; and asset management services.
Outsourcing services are typically provided through a mixture of on-site and
centrally managed resources.
Core Support Services. The Company offers a variety of PC and network
operation and support services, including system installation, integration, and
relocation; maintenance and repair; warranty services; and system management
upgrades. Deskside support services include installation, moves, adds, and
changes to desktop computing devices. In addition, deskside services include
on-going support of PCs from an end-user perspective, including application
enablement, optimization and connectivity. The Company provides a range of
warranty programs, passing existing manufacturer warranties to clients.
Customers benefit by receiving a single point of contact for warranty services
on a wide range of products.
Help Desk Services. Help desk services for end-user hardware and software
support are provided on-site at customer locations as well as through the
Company's centralized Solution Line service. The Company also provides network
help desk services through its centralized Enterprise Support Line.
Asset Management Services. The Company's asset management services assist
customers in formulating policies and procedures and implementing automated
processes to manage more effectively PC assets deployed throughout their
organizations.
OPERATIONS
The Company's National Service Center ("NSC") supports the Company's field
personnel with product acquisition specialists, order entry, order management,
product management, help desk services, remote network management and national
dispatch services. The NSC is located in a facility in Mason, Ohio which
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houses the Company's centralized back office functions and personnel, including
its Corporate Account Center ("CAC"), Solution Line, dispatch services and
training centers. The Company has 48 branch offices located in 30 states and
five regional offices to support the Company's five operating regions (East,
Midwest, South, Central and West).
All of the Company's product configuration, build-to-order and distribution
activities are conducted at the Company's Integration Center located in
Erlanger, Kentucky, less than five miles from the Cincinnati/Northern Kentucky
International Airport. The facility is 255,000 square feet and is ISO 9002
certified.
SALES AND MARKETING
The Company targets its marketing efforts primarily at senior level
executive, financial, purchasing and information management personnel at Fortune
1000 companies and other large enterprises. ENTEX markets its products and
services through its direct sales force operating from 48 branch offices. Sales
personnel nationwide are also supported by the Company's CAC. In addition, the
Company participates in industry trade shows and conferences and distributes
sales and product literature.
In fiscal 1997, none of the Company's customers accounted for more than 5%
of the Company's total revenues.
COMPETITION
The computer products and services industry is intensely competitive. The
Company expects competition to intensify in the future. As an integrated product
and service provider, ENTEX competes with PC system integrators, high-end system
integrators, PC resellers and distributors, service providers and direct
marketers. In addition, there is increased competition from manufacturers such
as Hewlett Packard Company ("HP"), Compaq Computer Corporation ("Compaq"),
Digital Equipment Corporation ("DEC") and Unisys Corporation ("Unisys"), who
sell direct to the Company's customer base. PC system integrators include GE
Capital Information Technology Solutions, Inc., CompuCom Systems, Inc. and
Vanstar Corp. High-end system integrators have traditionally been
mainframe-oriented service providers and include Andersen Consulting, Computer
Sciences Corporation, IBM Global Services and SHL SystemHouse Inc., a division
of MCI Communications Corp. PC resellers and distributors include InaCom Corp.
and MicroAge Inc. Service providers are firms which have focused their business
exclusively on providing PC and network related services and include Decision
One Corp. and Technology Service Solutions. Direct marketers include Dell
Computer Corp. ("Dell"). In addition to these large national companies, ENTEX
also competes against numerous regional and local companies, many of which have
long-standing customer relationships.
Some of the Company's competitors have greater financial, technical and
marketing resources at a lower cost structure than the Company. As a result,
such companies may be able to respond more quickly to new or emerging
technologies and changes in customer needs, devote more resources to the
development, promotion and sales of their services or deliver products at a
lower price than the Company. In addition, competition could result in price
decreases and depress gross margins in the industry. Further declines in the
Company's gross margins may exacerbate the impact of fluctuating net revenues on
the Company's operating results and have a material adverse effect on the
Company's business, operating results and financial condition.
The principal competitive factors in the Company's industry include the
breadth and quality of product and service offerings, product availability,
cost, pricing, sales and distribution strategies, and expertise and size of the
technical workforce. The Company believes that it competes favorably with
respect to each of these factors. However, there can be no assurance that the
Company will, in the future, be able to compete successfully against existing or
future competitors or that such competition will not adversely affect the
Company's business, operating results and financial condition. See "-- Business
Factors -- Intense Competition" and "-- Increased Competition from Direct
Marketers."
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EMPLOYEES
As of September 28, 1997, the Company had over 8,000 employees. None of the
Company's employees is subject to a collective bargaining agreement. The Company
has never experienced a work stoppage and considers its employee relations to be
good.
BUSINESS FACTORS
In evaluating the Company's business, the following business factors should
be carefully considered. In addition, this document contains certain
forward-looking statements and trend analysis based on current expectations.
Actual results may differ materially due to a number of factors, including those
set forth below.
Fluctuations in Quarterly Results. The Company's quarterly results have
varied in the past and the Company expects its quarterly operating results to
continue to fluctuate. The Company's net revenues may fluctuate due to a variety
of factors, including the level of expenditures by large enterprises for PC
hardware, software and related products and services in general, demand for the
Company's products and services in particular, the timing of orders for the
Company's products and services, product supply constraints, the Company's
build-to-order programs and customer demand driven by the introduction and
adoption of new products. Due to its narrow product gross margins, the Company's
operating results may be especially sensitive to changes in the mix of product
and service revenues, the margin mix of products sold, the margin mix of
services sold and the level of its operating expenses. The Company's expenses
may fluctuate as a result of numerous factors, including interest rates, the
timing and rate of new employee hiring, the amount and timing of vendor-provided
allowances, the utilization rate of service personnel, competitive conditions
and the impact of acquisitions. The Company's costs are largely fixed in the
near term and the Company may be unable to adjust spending in a timely manner to
compensate for an unexpected revenue shortfall. As a result, revenue shortfalls
may have an immediate and disproportionate adverse effect on operating results.
In addition, if the Company spends to build its capabilities to support higher
revenue levels, the Company's near term operating results will suffer until it
achieves its revenue goals. Due to the Company's recent growth, it is difficult
to discern seasonal trends. However, the Company believes that first and third
quarter revenues may be negatively affected due to generally lower computing
equipment purchases during the summer months which coincide with the first
quarter; and in January which falls within the third quarter. Due to all of
these factors, the Company believes that its operating results are likely to
vary on a quarterly basis. As a result, period-to-period comparisons of its
operating results are not necessarily meaningful, and quarterly results may not
be indicative of results to be expected for a full year. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Gross Margins for Product Sales. Approximately 86% of the Company's net
revenues in fiscal 1997 were generated through sales of PC hardware, software
and related products. The Company believes that competitive conditions will
continue to place pressures on its product gross margins. Furthermore, the
original purchase price of products is often offset by favorable vendor
allowances and negotiated price protection agreements against price decreases on
inventory carried by the Company. There can be no assurance that vendors will
continue to offer such vendor allowances or price protection at the current
levels. A reduction or elimination of such vendor programs could significantly
decrease the Company's product gross margins. In addition, such vendor
allowances and refunds for price decreases are not automatic and must be tracked
and collected by the Company. The Company's failure to effectively manage such
vendor receivables may further decrease product gross margins. Narrow product
gross margins result in fluctuations in net revenues and operating costs which
may have a disproportionate impact on the Company's operating results. Further
declines in the Company's product gross margins may have a material adverse
effect on the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Dependence on Integration Center. All of the Company's product
configuration, build-to-order and distribution activities are conducted at the
Company's Integration Center in Erlanger, Kentucky. Disruption of operations at
its Integration Center for any reason, including power or telecommunications
failures, natural disasters such as fires, tornados or floods, or work
stoppages, would have a material adverse effect on the
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Company's business, operating results and financial condition. In addition, the
Company relies almost entirely on Skyway Freight Systems, Inc. ("Skyway"), an
independent shipping company, for the delivery of its products. The failure or
inability of Skyway to deliver products to the Company's customers on a timely
basis, whether as a result of a work stoppage or slow-down, or the unanticipated
termination of the Company's arrangement with Skyway, could have a material
adverse effect on the Company's business, operating results and financial
condition.
Increased Emphasis on Service Offerings. The Company's service operations
are characterized by higher gross margins than those attainable in product
sales. During fiscal 1997, service revenues grew 70% to $353.6 million while
product revenues grew 9.6% to $2.1 billion. The Company's success in increasing
its service revenues will depend primarily on the continued need for the
Company's services and the continued acceptance by large companies of
outsourcing as a solution to their PC management needs. In addition, the Company
must have the ability to identify opportunities where its service solutions are
appropriate, sell such service solutions at attractive margins, successfully
implement such solutions and maintain the quality of its service offerings. To
the extent that the Company does not successfully increase the proportion of
revenues attributable to its service business, the Company's operating margins
may be adversely affected. In order to expand its service operations, the
Company will need to recruit, train and retain a significant number of qualified
technical personnel, and integrate them into the Company. There can be no
assurance that the Company will do so successfully. The expense of these efforts
and the costs associated with the hiring of additional service personnel and
expansion of the Company's service infrastructure will be incurred prior to
increases in service revenues. If service revenues do not increase sufficiently
or the Company fails to accurately price its services, the Company's business,
operating results and financial condition would be materially and adversely
affected.
A number of the Company's service offerings depend on central service and
sales support or dispatch coordination from its NSC in Mason, Ohio. Disruption
of operations at the Mason facility, including power or telecommunications
failures, natural disasters such as fires, tornados or floods, or work
stoppages, would have a material adverse effect on the Company's service
operations and could affect customer relationships. See "-- Need to Recruit and
Retain Management, Technical and Sales Personnel," "Business -- Products and
Services" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Need to Recruit and Retain Management, Technical and Sales Personnel. The
Company believes that its future success depends, to a large extent, upon the
efforts and abilities of its executive officers, managers, technical and sales
personnel. The Company's expansion of its service operations requires the
recruiting and training of a significant number of additional qualified
technical personnel, including project managers and network integration
specialists. Frequently, the Company must rapidly hire a significant number of
technical personnel to staff projects at customer sites. The Company's inability
to hire such personnel within the time schedule agreed to with the customer
could damage customer relationships and result in lost revenues. Competition for
qualified technical and sales personnel is intense. The Company competes with
other service providers as well as with its own customers, including those at
whose locations ENTEX employees work. Failure by the Company to attract and
train skilled managers, technical and sales personnel on a timely basis, or the
inability of the Company to retain such personnel, could materially and
adversely affect the Company's business, operating results and financial
condition. In 1987, Dort A. Cameron III, the Chairman of the Board of Directors
and a co-founder of the Company, was diagnosed with multiple sclerosis. See
"Directors and Executive Officers."
Management of Growth. The Company has experienced significant growth since
its inception. This rapid growth has placed, and is expected to continue to
place, a significant strain on the Company's management, financial, sales,
technical and support systems and personnel. The Company's ability to manage its
growth effectively will require it to continue to develop and improve its
operational, financial and other internal systems and train, manage and motivate
its employees. The Company has in the past and will continue in the future to
evaluate the acquisition of businesses that complement or expand the Company's
technical skills, service offerings or geographical presence. Integrating newly
acquired companies could be costly and may result in the loss of customers and
key personnel and may disrupt operations. Additionally, integrating newly
acquired businesses may divert significant management resources and attention
from day to day operations.
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Intense Competition. The computer products and services industry is
intensely competitive. The Company expects competition to intensify in the
future. As an integrated product and service provider, ENTEX competes with PC
system integrators, high-end systems integrators, PC resellers and distributors,
service providers and direct marketers. In addition, there is increased
competition from manufacturers such as HP, Compaq, DEC and Unisys, who sell
direct to the Company's customer base. PC system integrators include GE Capital
Information Technology Solutions, Inc., CompuCom Systems, Inc. and Vanstar Corp.
High-end system integrators have traditionally been mainframe-oriented service
providers and include Andersen Consulting, Computer Sciences Corporation, IBM
Global Services and SHL SystemHouse Inc., a division of MCI Communications Corp.
PC resellers and distributors include InaCom Corp. and MicroAge Inc. Service
providers are firms which have focused their business exclusively on providing
PC and network related services and include Decision One Corp. and Technology
Service Solutions. Direct Marketers include Dell. In addition to these large
national companies, ENTEX also competes against numerous regional and local
companies, many of which have long-standing customer relationships. Some of the
Company's competitors have greater financial, technical and marketing resources
at a lower cost structure than the Company. As a result, such companies may be
able to respond more quickly to new or emerging technologies and changes in
customer needs, devote more resources to the development, promotion and sales of
their services or deliver products at a lower price than the Company. In
addition, competition could result in price decreases and depress gross margins
in the industry. Further declines in the Company's gross margins may exacerbate
the impact of fluctuating net revenues on the Company's operating results and
have a material adverse effect on the Company's business, operating results and
financial condition. See "-- Increased Competition from Direct Marketers" and
"Business -- Competition."
Increased Competition from Direct Marketers. The Company competes with
several manufacturers in meeting the distributed information needs of large
enterprises. Notably, direct marketers such as Dell compete with the Company by
selling directly to Fortune 1000 clients. The expansion of the direct selling
model has increased the competitive risks in an already highly competitive
market. To combat the additional competition, the Company has enhanced its
System Builder program to provide for final assembly services and has joined
with certain vendors to provide products to customers on a build-to-order basis.
However, there can be no assurance that ENTEX will be able to successfully
transition from its current systems which utilize high levels of inventory to
managing a more streamlined product fulfillment process. In addition, there can
be no assurance that the vendors can supply components on a "just-in-time" basis
to allow successful management of a build-to-order program. The Company's
failure to successfully transition to the build-to-order process could have a
material adverse effect on the Company's business, operating results and
financial condition. See "-- Intense Competition."
Fixed Fee Service Contract and Service Level Agreement Risks. The Company
has begun implementing and intends to expand the use of new pricing policies for
its service offerings. Such new pricing policies include pricing on a fixed fee
or per end-user basis and on a service and support performance metrics basis
rather than on a time and materials basis. As a result, the Company must
accurately assess the scope of work of each project and estimate the resources
required to complete the project and to meet any service and support performance
metrics. Failure by the Company to accurately estimate the scope of a project or
support expenses or to meet service and support performance metrics could have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, the Company has certain warranty service
commitments for which the Company seeks reimbursement from manufacturers. A
reduction by manufacturers in the scope or duration of their reimbursements for
warranties which the Company cannot contractually pass on to its customers or
the failure of the Company to properly track and collect such reimbursements
could have a material adverse effect on the Company's business, operating
results and financial condition.
Dependence on Vendors. A significant portion of the Company's revenues are
derived from sales of PC hardware, software and related products. Approximately
62.2% of such product revenues in fiscal 1997 were attributable to sales of
products manufactured by Compaq, HP and IBM. The Company's agreements with these
manufacturers do not provide for long-term supply commitments and can be
terminated with 15 to 90 days' notice. From time to time, the PC industry has
experienced product constraints, with vendors
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allocating product based on criteria beyond the buyer's control. In the event
the Company is not able to obtain sufficient quantities of products from its
vendors or sufficient component parts for use in its build-to-order programs,
the Company's business, operating results and financial condition could be
materially and adversely affected. The Company works closely with its key
manufacturers. Many manufacturers provide vendor allowances which the Company
uses to reduce cost of goods sold and to subsidize a variety of activities
including many of its employee and customer training programs. In addition, many
manufacturers provide ENTEX with early previews of new products and technology
and instruction and training for ENTEX technical and support personnel on the
use of these new products. There can be no assurance that these arrangements
will continue in the future. In the event that these arrangements were
discontinued or industry practices were to change, commercial terms with vendors
were to change generally, or the Company were to otherwise lose vendor support,
the Company's business, operating results and financial condition could be
materially and adversely affected. See "--Gross Margins for Product Sales."
Risks of Inventory Obsolescence; Inventory Management. In order to offer
rapid delivery and efficient support and service to its customers, the Company
maintains relatively high levels of products and parts inventory. The Company
attempts to protect itself from inventory obsolescence and inventory price
reductions by negotiating price protection and stock balancing arrangements with
its vendors and enforcing a limited return policy with its customers. These
arrangements entitle the Company to receive refunds from manufacturers equal to
price decreases on inventory carried by ENTEX and provide ENTEX the ability to
return, subject to certain conditions including restocking fees, slow moving
products. Such price protection and stock balancing provisions provided through
the Company's supply agreements or particular manufacturers' sales policies may
provide only limited protection against inventory risks. The Company's suppliers
have been decreasing the level of price protection and return privileges offered
and there can be no assurance that such suppliers will not continue to further
decrease or eliminate such protection in the future. Manufacturers experiencing
financial difficulties may also be unable or unwilling to honor their price
protection and stock balancing commitments. Further, the Company regularly
disposes of excess and obsolete inventory at discounts to the Company's original
purchase price. Although the Company sets up reserves for losses associated with
the disposal of excess and obsolete items and records inventories net of these
reserves, there can be no assurance that such reserves will be adequate. Changes
in industry practices which increase the risks associated with maintaining high
levels of inventory, the Company's inability to effectively manage its current
and future inventory, or significant adjustments to the value of its inventory
could materially and adversely affect the Company's business, operating results
and financial condition. See "--Increased Competition from Direct Marketers,"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Year 2000 Compliance. The Company uses a significant number of computer
software programs and operating systems in its internal operations, including
applications used in financial business systems and various administration
functions. As the year 2000 approaches, each of these computer systems will be
affected in some way by the rollover of the two digit year value to 00. If these
systems are unable to properly recognize date sensitive information when the
year changes to 2000, they could generate erroneous data or cause a system to
fail. The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for year 2000 compliance. Given the
information known at this time about the Company's systems, coupled with the
Company's ongoing efforts to upgrade or replace business critical systems as
necessary, it is currently not anticipated that these year 2000 costs will have
a material adverse effect on the Company's business, operating results and
financial condition. However, the Company is still analyzing its computer
systems and, to the extent they are not fully year 2000 compliant, there can be
no assurance that the costs necessary to update software or potential systems
interruptions would not have a material adverse effect on the Company's
business, operating results and financial condition.
Rapid Technological Change. The personal computer products and services
industry is subject to rapid technological change, evolving industry standards
and frequent new product and service introductions. The Company must, on a
timely and cost-effective basis, continuously respond to new product
introductions. It must source such new products, develop and introduce new
services which keep pace with technological developments and increasingly
sophisticated network systems, and train its employees to provide the necessary
services to support new products and systems. There can be no assurance that the
Company will be able to source new products to meet customer demand, respond to
technological developments in a timely manner, if at all, or that its service
offerings will adequately meet the changing requirements of its customers and
achieve market acceptance. Further, suppliers may restrict the Company's access
to new products. The Company's failure to successfully source new products or
develop and introduce new services which meet evolving customer needs could have
a material adverse effect on the Company's business, operating results and
financial condition.
Control by Principal Stockholders. The directors and executive officers of
the Company beneficially own approximately 82% of the outstanding shares of
Common Stock. As a result, the directors and executive officers of the Company
are able to control the election of members of the Company's Board of Directors
and generally exercise control over the Company's corporate actions. In
particular, Dort A. Cameron III, the Company's Chairman, and entities controlled
by Mr. Cameron (the "Cameron Affiliates") exercise a high degree of control over
the Company's actions. The Cameron Affiliates together beneficially own
approximately
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77% of the outstanding shares of Common Stock. In addition, pursuant to certain
provisions of a Stockholders' Agreement dated as of December 10, 1993 (as
amended, the "Stockholders' Agreement"), the Cameron Affiliates have a right to
purchase additional shares of Common Stock from certain employees of the Company
(the "Participants") under certain circumstances. The Participants own
approximately 18% of the outstanding shares of Common Stock and include John A.
McKenna, Jr., Dale H. Allardyce and David J. Csira. Pursuant to the
Stockholders' Agreement, in the event that a Participant's employment is
terminated under certain circumstances, the Company will have an option to
purchase such Participant's shares of Common Stock. However, if the Company is
not able to pay the full amount of the total purchase price in cash in
connection with its repurchase rights, the Company must assign its rights to the
Cameron Affiliates. Further, pursuant to the Stockholders' Agreement, the
Participants have agreed to vote in the same manner as the Cameron Affiliates in
connection with certain transactions which are outside of the ordinary course of
business and the Cameron Affiliates have agreed to vote their shares of Common
Stock to elect a nominee of the Participants to the Board of Directors of the
Company. Such concentration of ownership as well as the voting provisions of the
Stockholders' Agreement may have the effect of delaying or preventing a change
in control of the Company. See "Security Ownership of Certain Beneficial Owners
and Management" and "Certain Transactions and Related Transactions."
Anti-Takeover Effects. Certain provisions of the Company's Certificate of
Incorporation, as amended, Bylaws and Delaware law may be deemed to have an
anti-takeover effect. The Company's Certificate of Incorporation provides that
the Board of Directors may issue additional shares of Common Stock without
stockholder approval. The Company's Bylaws do not permit anyone other than the
Board of Directors, the Chairman of the Board or the President to call special
meetings of the stockholders. In addition, the Company is subject to the
antitakeover provisions of Section 203 of the Delaware General Corporation Law
(the "DGCL"). In general, the statute prohibits a publicly-held Delaware
corporation or a privately-held Delaware corporation with more than 2,000
stockholders from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. Each of the foregoing provisions
gives the Board of Directors, acting without stockholder approval, the ability
to prevent, or render more difficult or costly, the completion of a takeover
transaction that stockholders might view as being in their best interests,
including a takeover transaction that might result in a premium over the market
price for the shares of Common Stock. See "Description of Company's Securities
to be Registered."
Absence of Dividends. The Company has never declared or paid any cash
dividends on its Common Stock and does not presently intend to pay cash
dividends on the Common Stock in the foreseeable future. The Company currently
anticipates that it will retain future earnings for reinvestment in its
business. Furthermore, the Company's Fourth Amended and Restated Agreement for
Wholesale Financing, as amended from time to time (the "IBMCC Financing
Agreement") with IBM Credit Corporation ("IBMCC") prohibits the Company from
paying cash dividends on the Common Stock. See "-- High Degree of Leverage;
Dependence on IBM Credit Corporation; Future Capital Needs."
High Degree of Leverage; Dependence on IBM Credit Corporation; Future
Capital Needs. The Company requires substantial working capital to fund its
business and, in particular, to finance product inventory, accounts receivable
and capital expenditures. To date, the Company has relied on several credit
facilities to finance its business and its expansion. As a result, the Company
is highly leveraged and at September 28, 1997 and June 29, 1997, the Company's
total interest bearing outstanding debt was $374.7 million and $396.5 million,
respectively. The Company has financed a significant portion of its working
capital needs under the IBMCC Financing Agreement, a working capital line of
credit of up to $525 million (the "IBMCC Working Capital Line of Credit"), the
interest bearing portion of which was $333.3 million as of September 28, 1997.
Borrowings under the IBMCC Working Capital Line of Credit are secured by the
Company's assets, including certain accounts receivable, certain inventory and
other assets. The amount of available borrowings under the IBMCC Working Capital
Line of Credit may be increased for higher seasonal purchasing requirements and
may be reduced or terminated by IBMCC upon 60 days prior notice. The IBMCC
Financing Agreement is subject to annual renewal and expires September 15, 1998.
There can be no assurance that IBMCC will not reduce amounts available under or
terminate the IBMCC Working Capital Line of Credit or that IBMCC will
9
<PAGE> 10
renew the IBMCC Financing Agreement in any year. The IBMCC Financing Agreement
provides for a term loan in the original principal amount of $20 million (the
"IBMCC Long-Term Loan"), a short term loan in the original principal amount of
$55 million (the "Short-Term Loan") and a special working capital advance in the
original principal amount of $20 million (the "Special Working Capital
Advance"). The IBMCC Long-Term Loan is required to remain outstanding unless
there are no outstanding interest bearing advances under the IBMCC Financing
Agreement. The Short-Term Loan has been repaid in full. The Company also
maintains a vendor relationship with International Business Machines Corporation
("IBM"), of which IBMCC is an affiliate. There can be no assurance that any
deterioration in the vendor-customer relationship between the Company and IBM
will not adversely affect the Company's relationship with IBMCC or its ability
to secure adequate working capital through IBMCC. In addition, from time to
time, the Company has failed to comply with certain financial covenants of the
IBMCC Financing Agreement. In the past, IBMCC has promptly waived such defaults.
However, there can be no assurance that IBMCC will waive future breaches of such
covenants. If IBMCC substantially reduces the amounts available under the IBMCC
Working Capital Line of Credit or fails to renew or otherwise terminates the
IBMCC Financing Agreement, the Company would be required to seek alternative
sources of financing. No assurance can be given that such alternative financing
will be available or if available, will be available on terms that are favorable
to the Company. The Company's inability to procure such financing would have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, if Dort A. Cameron III ceases to own and/or
control at least 35% of the issued and outstanding capital stock of the Company,
the Company will be deemed to be in default under the IBMCC Financing Agreement.
At present, the Cameron Affiliates beneficially own approximately 77% of the
outstanding shares of the capital stock of the Company. However, there can be no
assurance that they will continue to do so.
Substantially all of the Company's outstanding indebtedness is tied to the
prime rate, including the IBMCC Working Capital Line of Credit which bears
interest at the prime rate plus .50% and the other loans under the IBMCC
Financing Agreement which bear interest at the prime rate plus 2.50%. The
Company is not currently a party to any financial instruments which would
mitigate the Company's exposure to increases in the prime interest rate.
Accordingly, increases in the prime rate could adversely impact the Company's
pretax income or otherwise materially and adversely affect the Company's
business, operating results and financial condition. Also, there can be no
assurance that the Company will be able to generate sufficient cash from
operations to satisfy future interest and principal payments under its credit
facilities. In the event that the Company is unable to meet its payment
obligations or needs additional capital to fund its business, the Company would
be required to seek alternative sources of financing or attempt to refinance its
existing credit facilities. There can be no assurance that such alternative
equity or debt funding would be available on terms acceptable to the Company, if
at all. Under such circumstances, the Company's inability to procure additional
funding or refinance existing indebtedness would have a material adverse effect
on the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
10
<PAGE> 11
ITEM 2. FINANCIAL INFORMATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements of the Company and the
related notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere herein. The consolidated
statements of operations data set forth below with respect to the years ended
July 2, 1995, June 30, 1996 and June 29, 1997 and the consolidated balance sheet
data as of June 30, 1996 and June 29, 1997 are derived from the audited
consolidated financial statements included elsewhere in this Registration
Statement, which have been audited by KPMG Peat Marwick LLP. The consolidated
statements of operations data as set forth below with respect to the year ended
July 3, 1994 and the consolidated balance sheet data for the years ended July 3,
1994 and July 2, 1995 are derived from audited financial statements not included
herein. The consolidated statements of operations data for the three months
ended September 28, 1997 and September 29, 1996 and the consolidated balance
sheet data as of September 28, 1997 are derived from unaudited financial
statements included elsewhere in the Registration Statement. The balance sheet
data as of September 29, 1996 is derived from unaudited financial statements
which are not included elsewhere herein. The unaudited data has been prepared on
the same basis as the audited financial statements appearing elsewhere herein,
and include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such information for the periods presented.
The information set forth in this Registration Statement reflects a four-for-one
stock dividend to holders of shares of the Company's Common Stock which occurred
in November 1997. See Note 10 of Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
----------------------------- -----------------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, JUNE 29, JUNE 30, JULY 2, JULY 3,
1997 1996 1997 1996 1995 1994(1)
------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Product revenues.................... $ 500,938 $ 525,962 $ 2,126,973 $ 1,940,796 $ 1,342,323 $ 1,019,010
Service revenues.................... 105,901 71,674 353,624 207,511 130,940 75,917
----------- ----------- ----------- ----------- ----------- -----------
Total net revenues............ 606,839 597,636 2,480,597 2,148,307 1,473,263 1,094,927
----------- ----------- ----------- ----------- ----------- -----------
Cost of revenues:
Cost of products sold............... 450,781 482,716 1,922,826 1,764,775 1,236,940 917,939
Cost of services provided........... 79,872 54,039 267,554 168,957 110,349 64,300
----------- ----------- ----------- ----------- ----------- -----------
Cost of revenues.............. 530,653 536,755 2,190,380 1,933,732 1,347,289 982,239
----------- ----------- ----------- ----------- ----------- -----------
Product gross margin.................. 50,157 43,246 204,147 176,021 105,383 101,071
Services gross margin................. 26,029 17,635 86,070 38,554 20,591 11,617
----------- ----------- ----------- ----------- ----------- -----------
Total gross margin............ 76,186 60,881 290,217 214,575 125,974 112,688
Selling, general and administrative
expenses............................ 61,815 58,547 251,963 192,312 132,586 100,790
Nonrecurring stock compensation
costs............................... -- -- -- 18,185 -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
operations.................. 14,371 2,334 38,254 4,078 (6,612) 11,898
Interest expense, net............... 9,669 8,132 37,147 29,726 23,151 17,444
Other income........................ -- -- 462 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes....................... 4,702 (5,798) 1,569 (25,648) (29,763) (5,546)
Provision (benefit) for income
taxes............................... 2 10 25 28 (509) (2,225)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)............. $ 4,700 $ (5,808) $ 1,544 $ (25,676) $ (29,254) $ (3,321)
=========== =========== =========== =========== =========== ===========
Net income (loss) per share........... $ .14 $ (.18) $ .04 $ (.82) $ (.93) $ (.12)
=========== =========== =========== =========== =========== ===========
Weighted average number of shares and
dilutive common stock equivalents
outstanding(2)...................... 33,736,205 32,357,840 35,296,435 31,348,340 31,333,300 28,053,165
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------
SEPTEMBER 28, JUNE 29, JUNE 30, JULY 2, JULY 3, AUGUST 6,
1997 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................ 665,644 683,590 590,588 415,170 351,777 329,701
Total long-term liabilities................. 49,477 49,486 52,509 37,224 38,425 37,382
Stockholders' equity (deficit).............. (32,929) (37,732) (39,515) (31,305) (2,623) (11,767)
</TABLE>
- ---------------
(1) The statements of operations data for the Company's 1994 fiscal year
presents the results of operations from August 6, 1993, the date the Company
acquired the net assets of the domestic information systems business of JWP
Inc.
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the calculation of weighted average number of shares outstanding.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This section contains trend analysis and other forward-looking statements
based on current expectations. Actual results may differ materially, due to a
number of factors including those set forth in the section entitled "Business
Factors" contained in Item 1 of this Registration Statement.
OVERVIEW
ENTEX is a leading provider of PC solutions to meet the distributed
information technology systems and end-user support requirements of Fortune 1000
companies and other large enterprises. The Company's total PC management
capabilities include acquisition and procurement services and network,
professional and other outsourcing service support for the PC-based network
environment.
During fiscal 1996 and 1997, the Company completed several acquisitions to
improve its ability to meet customer demands for expanded service offerings,
including (i) Random Access, Inc. ("Random Access"), a provider of information
technology solutions through the sale of microcomputers and technical services
to corporate and institutional clients in the western United States, and (ii)
FCP Technologies, Inc. ("FCP"), a systems integrator specializing in network
integration, migration and consulting services. Each acquisition was accounted
for as a purchase and the results of each have been included in the consolidated
financial statements since the date of the each acquisition. See Note 2 of Notes
to Consolidated Financial Statements.
The Company has two principal sources of revenues: product revenues and
service revenues. Product revenues include acquisition and procurement of
personal computer and network products, software and peripherals. Service
revenues include configuration services, network and professional services,
migration services, outsourcing services, PC and network operation support
services, on-site and centrally located help desk services, as well as asset
management services. ENTEX has expanded rapidly, growing from $1.1 billion in
total net revenues for the eleven months in fiscal 1994 to $2.5 billion in total
net revenues in fiscal 1997. While product revenues have historically accounted
for more than 80% of total net revenues, service revenues have grown in absolute
dollar terms and as a percentage of total net revenues in each fiscal year since
the Company's inception.
12
<PAGE> 13
RESULTS OF OPERATIONS
The following table sets forth the percentage of total net revenues
represented by the items in the Company's statements of operations for the
period indicated:
<TABLE>
<CAPTION>
THEE MONTHS ENDED FISCAL YEAR ENDED
----------------------- ---------------------------------
SEPT. 28, SEPT. 29, JUNE 29, JUNE 30, JULY 2,
1997 1996 1997 1996 1995
--------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues............................ 82.5% 88.0% 85.7% 90.3% 91.1%
Service revenues............................ 17.5 12.0 14.3 9.7 8.9
--- --- --- --- ---
Total net revenues.................. 100.0 100.0 100.0 100.0 100.0
Cost of revenues.............................. 87.4 89.8 88.3 90.0 91.4
--- --- --- --- ---
Gross margin(1)............................... 12.6 10.2 11.7 10.0 8.6
Selling, general and administrative
expenses.................................... 10.2 9.8 10.2 9.0 9.0
Nonrecurring stock compensation costs......... -- -- -- 0.8 --
--- --- --- --- ---
Income (loss) from operations................. 2.4 0.4 1.5 0.2 (0.4)
Interest expense, net......................... 1.6 1.4 1.4 1.4 1.6
Income (loss) before income taxes............. 0.8 (1.0) 0.1 (1.2) (2.0)
Provision (benefit) for income taxes.......... -- -- -- -- --
--- --- --- --- ---
Net income (loss)............................. 0.8% (1.0)% 0.1% (1.2)% (2.0)%
=== === === === ===
</TABLE>
- ---------------
(1) Product gross margin as a percentage of product revenues and service gross
margin as a percentage of service revenue for each period was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
----------------------- ---------------------------------
SEPT. 28, SEPT. 29, JUNE 29, JUNE 30, JULY 2,
1997 1996 1997 1996 1995
--------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Product gross margin.......................... 10.0% 8.2% 9.6% 9.1% 7.9%
Services gross margin......................... 24.6 24.6 24.3 18.6 15.7
</TABLE>
Three Months Ended September 28, 1997 Compared to Three Months Ended September
29, 1996
The Company's net income improved in the three months ended September 28,
1997 to $4.7 million compared to a net loss of $5.8 million in the three months
ended September 29, 1996. The improvement was a result of an increase in product
gross margins attributable to improved controls over vendor programs and a
higher percentage of services in the revenue base.
Product revenues. Product revenues were $500.9 million for the three months
ended September 28, 1997 as compared to $526.0 million for the three months
ended September 29, 1996, a decrease of $25.1 million or 4.8%. While the Company
experienced overall unit growth in sales of desktops, laptops and server units
during the three months ended September 28, 1997, the revenue decline reflects
price reductions in average sales price driven by lower manufacturer prices and
intense competition.
Service revenues. Service revenues were $105.9 for the three months ended
September 28, 1997 as compared to $71.7 million for the three months ended
September 29, 1996, an increase of $34.2 million or 47.8%. Service revenues as a
percentage of total net revenues increased to 17.5% for the three months ended
September 28, 1997 as compared to 12.0% in the three months ended September 29,
1996. These increases
13
<PAGE> 14
reflect increase in demand from existing customers and the addition of new large
accounts. The Company is focused on continuing to increase service revenue as a
percentage of total net revenues.*
Gross margins. Total gross margins increased to 12.6% for the three months
ended September 28, 1997 as compared to 10.2% for the three months ended
September 29, 1996. This increase was due primarily to the revenue growth in the
higher margin service business. Product gross margin increased to 10.0% or $50.2
million for the three months ended September 28, 1997 as compared to 8.2% or
$43.2 million for the three months ended September 29, 1996. These increases
reflect the Company's efforts to improve product margins through improved
controls over price protection arrangements and vendor allowances and to a
lesser extent, the Company's involvement in certain manufacturers' programs
designed to increase sales of specific products. Future product margins may be
adversely influenced by manufacturers' pricing strategies and increased
competition.* Service margins remained constant over the periods at 24.6%,
reflecting an improved mix of services, partially offset by pricing pressures.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $61.8 million for the three months ended September
28, 1997 as compared to $58.5 million for the three months ended September 29,
1996, an increase of $3.3 million or 5.6%. The increase resulted from
expenditures in support of the Company's growth in services including
investments in the enterprise-wide technology infrastructure to support
operations.
Income from Operations. Income from operations was $14.4 million for the
three months ended September 28, 1997 as compared to $2.3 million in the three
months ended September 29, 1996, an increase of $12.1 million. The increase
reflects significant improvements in gross margins partially offset by increases
in selling, general and administrative expenses to support business expansion.
Interest expense, net. Net interest expense increased to $9.6 million for
the three months ended September 28, 1997 as compared to $8.1 million for the
three months ended September 29, 1996, an increase of $1.5 million or 18.9%. The
increase was driven by an increase in borrowing rates under the Company's credit
agreements and the prime rate in addition to increased working capital needs.
Provisions for income taxes. The Company utilized net operating loss
carryforwards to offset federal income tax requirements for the three months
ended September 28, 1997 and September 29, 1996. Although the Company recognized
net income for the three months ended September 28, 1997, based on the history
of negative pretax earnings, the Company has determined that it would be prudent
to maintain the valuation reserve against the deferred tax asset until it can
sustain several quarters of profitable operations. While the Company considered
the improved operations over the course of fiscal year 1997, the Company did not
believe that two quarters of profitable operations following two years of fairly
unprofitable operations was sufficient to conclude that it was more likely than
not that the deferred tax asset would be realized. The Company will reevaluate
the foregoing premise in connection with future periods.
Net income. As a result of the factors mentioned above, net income for the
three months ended September 28, 1997 was $4.7 million as compared to a net loss
of $5.8 million for the three months ended September 29, 1996.
Fiscal 1997 Compared to Fiscal 1996
The Company's net income improved in fiscal 1997 to $1.5 million compared
to a net loss of $25.7 million in fiscal 1996. The improvement resulted from an
increase in product gross margins attributable to improved controls over vendor
programs, an increased percentage of higher margin services in the revenue base
and the effect of a non-recurring stock compensation charge in 1996.
Product revenues. Product revenues were $2.1 billion in fiscal 1997 as
compared to $1.9 billion in fiscal 1996, an increase of $186.2 million or 9.6%.
The increase was primarily due to an increase of $159 million in equipment sales
and a $27 million increase in software sales. The increase in equipment sales
reflected the sale of more desktops, laptops and server units to existing
customers as well as new customers, although at a lower average sales price due
to manufacturers' price reductions.
- ---------------
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. Investors are strongly
encouraged to review the section entitled "Business Factors" contained in Item 1
of this Registration Statement, for a discussion of factors that could affect
future performance. The reader is cautioned that other sentences and sections
not so identified may also contain forward-looking information.
14
<PAGE> 15
Service revenues. Service revenues were $353.6 million in fiscal 1997 as
compared to $207.5 million in fiscal 1996, an increase of $146.1 million or
70.4%. The increase was due to higher professional service and outsourcing
revenues which were favorably affected by the acquisition of FCP, increased
sales to existing customers and the addition of new customers. An increase in
unit volume of products sold, such as desktops and laptops, also contributed to
the growth in service revenues which the Company believes will continue to
create demand for services such as configuration and installation.* The
Company's emphasis on growing service revenues was reflected in the growth of
service revenues as a percentage of total net revenues from 9.7% in fiscal 1996
to 14.3% in fiscal 1997.*
Gross margins. Total gross margins increased to 11.7% in fiscal 1997 from
10.0% in fiscal 1996, primarily due to the increased product and service
revenues, improved cost controls and increased service revenues in the mix of
products sold. Product gross margins were 9.6% in fiscal 1997 as compared to
9.1% in fiscal 1996. The increase in product gross margins was primarily due to
the Company's efforts to improve controls over price protection arrangements and
vendor allowances and to a lesser extent the Company's involvement in certain
manufacturers' programs designed to increase sales of specific products. The
increase was partially offset by competitive pricing strategies. Service gross
margins increased to 24.3% in fiscal 1997 from 18.6% in fiscal 1996 as a result
of pricing changes, a greater mix of higher margin professional services and the
Company's ability to further utilize its service personnel.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $252.0 million in fiscal 1997 as compared to $192.3
million in fiscal 1996, an increase of $59.7 million or 31.1%. The increase was
in support of the Company's growth in services including investments in
enterprise-wide technology infrastructure to support operations.
Income from Operations. Income from operations was $38.3 million in fiscal
1997 as compared to $4.1 million in fiscal 1996, an increase of $34.2 million.
This increase was due to overall improved profit margins and the effect of
nonrecurring stock compensation costs of $18.2 million which were recorded in
fiscal 1996.
Interest expense, net. Net interest expense was $37.1 million in fiscal
1997 as compared to $29.7 million in fiscal 1996, an increase of $7.4 million or
25.0%. The increase was due to increased interest rates charged to the Company
by lenders and increased financing to support revenue growth.
Provisions for income taxes. The Company utilized net operating loss
carryforwards to offset federal income tax requirements for the fiscal years
1997 and 1996. Although the Company recognized net income for fiscal 1997, based
on the history of negative pretax earnings, the Company has determined that it
would be prudent to maintain the valuation reserve against the deferred tax
asset until it can sustain several quarters of profitable operations. While the
Company considered the improved operations over the course of fiscal year 1997,
the Company did not believe that two quarters of profitable operations following
two years of fairly unprofitable operations was sufficient to conclude that it
was more likely than not that the deferred tax asset would be realized. The
Company will reevaluate the foregoing premise in connection with future periods.
Net income. As a result of the factors mentioned above, net income was $1.5
million in fiscal 1997 as compared to a loss of $25.7 million in fiscal 1996.
Fiscal 1996 Compared to Fiscal 1995
Product revenues. Product revenues were $1.9 billion in fiscal 1996 as
compared to $1.3 billion in fiscal 1995, an increase of $598.5 million or 44.6%.
This increase was primarily due to successful sales and marketing efforts and
increased product sales to existing customers as well as sales to new customers
and the acquisition of Random Access.
Service revenues. Service revenues were $207.5 million in fiscal 1996 as
compared to $130.9 million in fiscal 1995, an increase of $76.6 million or
58.5%. The increase was primarily due to successful sales and marketing efforts
and increased sales to existing customers and new customers.
- ---------------
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. Investors are strongly
encouraged to review the section entitled "Business Factors" contained in Item 1
of this Registration Statement, for a discussion of factors that could affect
future performance. The reader is cautioned that other sentences and sections
not so identified may also contain forward-looking information.
15
<PAGE> 16
Gross margins. Total gross margins increased to 10.0% in fiscal 1996 from
8.6% in fiscal 1995, primarily due to the increase in both product and service
gross margins. Product gross margins were 9.1% in fiscal 1996 as compared to
7.9% in fiscal 1995. Product gross margins were favorably impacted by increased
sales of higher margin network products. Service gross margins were 18.6% in
fiscal 1996 as compared to 15.7% in fiscal 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $192.3 million in fiscal 1996 as compared to $132.6
million in fiscal 1995, an increase of $59.7 million or 45%. The increase
reflected the integration of Random Access into the Company's operations and
investment in the Company's configuration capabilities, order processing
enhancements and enterprise-wide technology infrastructure upgrades.
Non-recurring stock compensation costs. Stock compensation costs in fiscal
1996 were $18.2 million, consisting of $16.2 million related to remeasurement of
compensation expense to fair market value and the assumption of $2.0 million in
estimated tax withholding.
Income from Operations. Income from operations, exclusive of nonrecurring
stock compensation costs, was $22.3 million in fiscal 1996, as compared to a
loss of $6.6 million in fiscal 1995.
Interest expense, net. Net interest expense was $29.7 million in 1996 as
compared to $23.1 million in 1995, an increase of $6.6 million or 28.4%. The
increase was primarily due to higher borrowings to finance increased working
capital requirements, partially offset by lower effective interest rates.
Net loss. As a result of the factors mentioned above, the Company
experienced a net loss of $25.7 million in 1996 as compared to a net loss of
$29.3 million in 1995. Exclusive of stock compensation costs, the Company's net
loss in fiscal 1996 was $7.5 million.
16
<PAGE> 17
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly statements of
operations data for the five quarters ended September 28, 1997, as well as such
data expressed as a percentage of total net revenues. The unaudited data has
been prepared on the same basis as the audited financial statements appearing
elsewhere herein, and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such information for
the periods presented. Such statement of operations data should be read in
conjunction with the consolidated financial statements of the Company and the
related notes thereto appearing elsewhere herein. The operating results for any
quarter are not indicative of the operating results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
SEPTEMBER 28, JUNE 29, MARCH 31, DECEMBER 31, SEPTEMBER 29,
1997 1997 1997 1996 1996
------------- -------- --------- ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues....................... $ 500,938 $542,032 $ 506,370 $552,609 $ 525,962
Service revenues....................... 105,901 104,356 92,824 84,770 71,674
-------- -------- -------- -------- --------
Total net revenues.............. 606,839 646,388 599,194 637,379 597,636
-------- -------- -------- -------- --------
Cost of revenues:
Cost of products sold.................. 450,781 482,841 456,088 501,181 482,716
Cost of services provided.............. 79,872 78,844 71,161 63,510 54,039
-------- -------- -------- -------- --------
Cost of revenues................ 530,653 561,685 527,249 564,691 536,755
-------- -------- -------- -------- --------
Product gross margin..................... 50,157 59,191 50,282 51,428 43,246
Services gross margin.................... 26,029 25,512 21,663 21,260 17,635
-------- -------- -------- -------- --------
Total gross margin.............. 76,186 84,703 71,945 72,688 60,881
Selling, general and administrative
expenses............................... 61,815 64,698 61,811 66,907 58,547
-------- -------- -------- -------- --------
Income from operations................... 14,371 20,005 10,134 5,781 2,334
Interest expense, net.................... 9,669 9,839 9,418 9,758 8,132
Other income............................. -- 462 -- -- --
-------- -------- -------- -------- --------
Income (loss) before income
taxes......................... 4,702 10,628 716 (3,977) (5,798)
Provision (benefit) for income taxes..... 2 1 9 5 10
-------- -------- -------- -------- --------
Net income (loss)............... $ 4,700 $ 10,627 $ 707 $ (3,982) $ (5,808)
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
SEPTEMBER 28, JUNE 29, MARCH 31, DECEMBER 31, SEPTEMBER 29,
1997 1997 1997 1996 1996
------------- -------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues......................... 82.5% 83.9% 84.5% 86.7% 88.0%
Service revenues......................... 17.5 16.1 15.5 13.3 12.0
---- ---- ---- ---- ----
Total net revenues................ 100.0 100.0 100.0 100.0 100.0
Cost of revenue............................ 87.4 86.9 88.0 88.6 89.8
---- ---- ---- ---- ----
Gross margin(1)............................ 12.6 13.1 12.0 11.4 10.2
Selling, general and administrative
expenses................................. 10.2 10.0 10.3 10.5 9.8
---- ---- ---- ---- ----
Income from operations..................... 2.4 3.1 1.7 0.9 0.4
Interest expense, net...................... 1.6 1.5 1.6 1.5 1.4
Other income............................... -- -- -- -- --
---- ---- ---- ---- ----
Income (loss) before income taxes........ 0.8 1.6 0.1 (0.6) (1.0)
Provision (benefit) for income taxes....... 0.0 -- -- -- --
---- ---- ---- ---- ----
Net income (loss)........................ 0.8% 1.6% 0.1% (0.6)% (1.0)%
==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) Product gross margin as a percentage of product revenues and services gross
margin as a percentage of service revenue for each period were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
SEPTEMBER 28, JUNE 29, MARCH 31, DECEMBER 31, SEPTEMBER 29,
1997 1997 1997 1996 1996
------------- -------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Product gross margin....................... 10.0% 10.9% 9.9% 9.3% 8.2%
Services gross margin...................... 24.6 24.4 23.3 25.1 24.6
</TABLE>
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations with borrowings under
various credit lines. Cash provided by (used in) operating activities was $21.1
million, $(26.1) million, $(74.7) million and $(10.1) million during the three
months ended September 28, 1997 and in fiscal years 1997, 1996 and 1995,
respectively. Cash provided by operations during the three months ended
September 28, 1997 resulted primarily from net income of $4.7 million,
depreciation and other non-cash charges to income, and from changes in operating
assets and liabilities. Cash used in operations in fiscal years ended June 29,
1997 and June 30, 1996, respectively, increased due to greater working capital
requirements resulting from higher revenues. For fiscal year ended 1995, cash
used in operations increased primarily due to a net loss of $29.3 million which
was partially offset by a decrease in net working capital requirements.
Cash (used in) investing activities was $(4.2) million, $(27.8) million,
$(33.1) million and $(9.0) million during the three months ended September 28,
1997 and in fiscal years 1997, 1996 and 1995, respectively. Cash was used during
these periods for capital expenditures and for acquisitions.
Cash provided from (used in) financing activities was $(22.4) million,
$57.2 million, $108.3 million and $19.9 million during the three months ended
September 28, 1997 and in fiscal years 1997, 1996 and 1995, respectively. The
fluctuations in cash from financing activities during these periods resulted
primarily from changes in the Company's borrowings to support the business
growth.
As of September 28, 1997, the Company's primary source of liquidity
consisted of various financing provided by IBMCC and an inventory financing
facility with FINOVA Capital Corporation ("FINOVA"). The IBMCC Financing
Agreement provides for borrowings under the IBMCC Working Capital Line of
Credit, the interest bearing portion of which was $333.3 million as of September
28, 1997. The amount of available borrowings under the IBMCC Financing Agreement
may be increased for higher seasonal purchasing requirements, and may be reduced
or terminated by IBMCC upon 60 days prior written notice. Amounts outstanding
under the IBMCC Working Capital Line of Credit bear interest at the prime rate
plus .50% (9.0% at September 28, 1997). Borrowings under the IBMCC Financing
Agreement are secured by the Company's assets, including certain accounts
receivable, certain inventories and other assets. The agreement is subject to
annual renewal and expires September 15, 1998.
In connection with the Company's acquisition of Random Access in September
1995, the IBMCC Financing Agreement was amended to provide for the IBMCC
Long-Term Loan in the original principal amount of $20 million. The IBMCC
Long-Term Loan is required to remain outstanding unless there are no outstanding
interest bearing advances under the IBMCC Financing Agreement. The IBMCC
Financing Agreement was further amended in December 1996 and July 1997 to
provide for the Short-Term Loan in the original principal amount of $55 million
and the Special Working Capital Advance in the original principal amount of $20
million. The Short-Term Loan was repaid in full subsequent to September 28,
1997. Amounts outstanding under the IBMCC Long-Term Loan and Special Working
Capital Advance bear interest at the prime rate plus 2.50% (11.0% at September
28, 1997). At September 28, 1997, $17.3 million of principal was outstanding
under the IBMCC Long-Term Loan, $27.5 million of principal was outstanding under
the Short-Term Loan and $20.0 million of principal was outstanding under the
Special Working Capital Advance.
As of September 28, 1997, the Company had $110 million available for
borrowing under its inventory line of credit with FINOVA. The line of credit is
secured by the Company's inventory financed by FINOVA. At September 28, 1997,
the principal amount outstanding under this line of credit was $70 million.
Under the terms of the agreement with FINOVA, the Company pays no interest on
this borrowing.
The IBMCC Financing Agreement provides that if Dort A. Cameron III ceases
to own and/or control at least 35% of the issued and outstanding capital stock
of the Company, the Company will be deemed to be in default under the IBMCC
Financing Agreement. In addition, the IBMCC Financing Agreement contains
restrictive covenants which require the Company to, among other things,
(i) maintain a ratio of current assets to current liabilities of at least 0.83
to 1.00; (ii) maintain the total liabilities minus the aggregate outstanding
principal amount of certain indebtedness during each fiscal year at an amount no
greater than $800 million; (iii) not permit the sum of tangible net worth plus
the aggregate outstanding principal amount of certain indebtedness to be less
than $60 million for the fiscal quarter ended December 1997, $48.2 million for
the fiscal quarter ended March 1998 and $38.7 million for all periods
thereafter; (iv) not permit the ratio of EBIT for interest expense for the
period of two consecutive fiscal quarters then ended to be less than 1.40 to
1.00 for the fiscal quarter ended December 1997, 1.60 to 1.00 for the fiscal
quarter ended March 1998 and 1.70 to 1.00 for each fiscal quarter thereafter;
(v) not permit the consolidated net income for the fiscal quarter ended
December 1997 to be less than .70% of sales for such fiscal quarter and for any
fiscal quarter thereafter to be less than 1.00% of sales for such fiscal
quarter; (iv) not permit the aggregate amount of capital expenditures made in
any fiscal year to exceed $30 million net of dispositions related to such
capital expenditures; and (vii) maintain working capital of at least $100.5
million for the fiscal quarter ended December 1997, $92.3 million for the
fiscal quarter ended March 1998 and at least $83.8 million for periods
thereafter. The Company is currently in compliance with all of these
restrictive covenants.
18
<PAGE> 19
In addition, the IBMCC Financing Agreement prohibits the Company from
paying cash dividends on Common Stock.
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is complex since virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for the year 2000 compliance. It is
anticipated that all reprogramming efforts will be complete by December 31,
1999, allowing adequate time for testing.* Given the information known at this
time about the Company's systems, coupled with the Company's ongoing efforts to
upgrade or replace business critical systems as necessary, it is currently not
anticipated that these year 2000 costs will have a material adverse effect on
the Company's business, operating results and financial condition. However, the
Company is still analyzing its computer systems and, to the extent they are not
fully year 2000 compliant, there can be no assurance that the costs necessary
to update software or potential systems interruptions would not have a material
adverse effect on the Company's business, operating results and financial
condition.
The Company has committed approximately $1.0 million toward capital
expenditures for the fiscal year ended June 28, 1998. The Company believes its
current cash balances and its available credit facilities will be sufficient to
meet its anticipated cash needs for capital expenditures for the next 12
months.* The Company intends to continue to finance a significant portion of its
working capital needs through credit facilities. The Company believes that it
may seek to raise additional funds through public or private equity or debt
financing or from other sources to support the future growth of the business.
However, there can be no assurance that the Company will be able to raise such
additional funding.
ITEM 3. PROPERTIES
The Company's headquarters are located in Rye Brook, New York, where the
Company leases approximately 31,200 square feet of office space under a lease
which expires on May 30, 2002 and approximately 12,100 square feet under a lease
which expires December 31, 1998. In addition, the Company owns a 255,000 square
foot facility in Erlanger, Kentucky which serves as the Company's integration
center. The Company also leases approximately 151,949 square feet of office
space in Mason, Ohio, which houses the Company's NSC, including its CAC,
Solution Line, dispatch services and training centers. The lease for such
property expires on July 17, 2005. The Company leases approximately 19,200
square feet of office space in Canton, Massachusetts to accommodate the
Company's data processing and credit and collections departments under a lease
which expires June 30, 1998.
The Company leases additional office space for sales, services and support
staff in various states. The Company believes that alternate office space is
available on comparable terms in each location.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of November 30, 1997 for
(i) each person or entity who is known by the Company to beneficially own five
percent or more of the outstanding Common Stock of the Company, (ii) each of the
Company's directors, (iii) each of the Named Officers (as defined below), and
(iv) all
- ---------------
*This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. Investors are strongly
encouraged to review the section entitled "Business Factors" contained in Item 1
of this Registration Statement, for a discussion of factors that could affect
future performance. The reader is cautioned that other sentences sections not so
identified may also contain forward-looking information.
19
<PAGE> 20
directors and executive officers of the Company as a group and reflects the
nine-for-one stock dividend of Common Stock effected by the Company on August
15, 1995 and the four-for-one stock dividend of Common Stock effected by the
Company on November 25, 1997:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
----------------------
NAME OF GROUP OR BENEFICIAL OWNERS NUMBER PERCENT
- ------------------------------------------------------------------------ ---------- -------
<S> <C> <C>
Dort A. Cameron III(2)
c/o Entex Information Services, Inc.
Six International Drive
Rye Brook, NY 10573.............................................. 25,000,000 77.2%
IBM Credit Corporation(3)
1133 Westchester Avenue
White Plains, NY 10604................................................ 2,436,055 7.4%
John A. McKenna, Jr.(4)(5).............................................. 666,650 2.1%
Kenneth Ghazey(6)....................................................... 333,333 1.0%
Dale H. Allardyce(7).................................................... 300,000 *%
David J. Csira(5)(8).................................................... 233,333 *%
Richard Nathanson....................................................... -- --
R. Randolph Devening(9)................................................. 26,239 *%
Linwood A. (Chip) Lacy, Jr.(10)......................................... 26,239 *%
Frank W. Miller......................................................... 13,740 *%
All directors and executive officers as a group (11 persons)(11)........ 26,924,534 82.1%
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of November 30, 1997
are deemed outstanding. Such shares, however, are not deemed outstanding
for the purposes of computing the percentage ownership of each other
person. Except as indicated in the footnotes to this table, pursuant to the
Stockholders' Agreement and pursuant to applicable community property laws,
each stockholder named in the table has sole voting and investment power
with respect to the shares set forth opposite such stockholder's name. See
"Business -- Business Factors -- Control by Principal Stockholders" and
"Description of Company's Securities to be Registered."
(2) Includes 21,500,000 shares registered in the name of ENTEX Associates L.P.
Dort A. Cameron III is the sole stockholder of the Putnam Group, Inc., the
general partner of ENTEX Associates L.P. Includes 1,851,850 shares
currently owned by Mr. Cameron which are subject to an immediately
exercisable option to purchase such shares which Mr. Cameron granted to
IBMCC. See "Certain Relationships and Related Transactions."
(3) Includes 1,851,850 shares of Common Stock currently owned by Mr. Cameron
which are subject to an option immediately exercisable by IBMCC to purchase
such shares and 584,205 shares of the Company's Common Stock subject to an
immediately exercisable warrant. See "Certain Relationships and Related
Transactions."
(4) Excludes 1,695,120 shares of the Company's Common Stock which are subject
to unvested options.
(5) Pursuant to the Stockholders' Agreement, in the event that Mr. McKenna's or
Mr. Csira's employment is terminated for any reason, the Company shall have
a right to purchase all shares of Common Stock owned by him. If the Company
is unable to purchase such shares in cash, the Cameron Affiliates will have
a right to purchase such shares. See "Business -- Business
Factors -- Control by Principal Stockholders" and "Certain Relationships
and Related Transactions."
(6) Includes 333,333 shares of the Company's Common Stock currently owned by
Mr. Ghazey which are subject to an option exercisable within 60 days of
November 30, 1997.
20
<PAGE> 21
(7) Pursuant to the Stockholders' Agreement, in the event Mr. Allardyce's
employment is terminated as a result of death or disability, the Company
shall have the right to purchase and Mr. Allardyce or his legal
representative shall have the right to require the Company to purchase all
of his shares of Common Stock. In the event Mr. Allardyce's employment is
terminated for cause, the Company shall have a right to purchase all of his
shares of Common Stock. See "Business -- Business Factors -- Control by
Principal Stockholder" and "Certain Relationships and Related
Transactions."
(8) Includes 33,333 shares of the Company's Common Stock currently owned by Mr.
Csira which are subject to an option exercisable within 60 days of November
30, 1997.
(9) Includes 12,499 shares of the Company's Common Stock currently owned by Mr.
Devening which are subject to an option exercisable within 60 days of
November 30, 1997.
(10) Includes 12,499 shares of the Company's Common Stock currently owned by Mr.
Lacy which are subject to an option exercisable within 60 days of November
30, 1997.
(11) Includes 391,664 shares of the Company's Common Stock which are subject to
options exercisable within 60 days of November 30, 1997.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
MANAGEMENT -- EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEE
The executive officers, directors and other key employees of the Company,
and their ages and positions as of November 30, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Dort A. Cameron III.................. 52 Chairman of the Board of Directors
John A. McKenna, Jr.................. 42 President, Chief Executive Officer and Director
Kenneth Ghazey....................... 41 Executive Vice President, Finance and Administration,
Chief Financial Officer and Director
Dale H. Allardyce.................... 48 Executive Vice President, Operations
David J. Csira....................... 40 Executive Vice President, Field Operations
Philip R. Johnson.................... 49 Senior Vice President, Human Resources
John Lyons........................... 44 Senior Vice President, Sales and Marketing
Richard Nathanson.................... 40 Senior Vice President, Services
R. Randolph Devening(1).............. 55 Director
Linwood A. (Chip) Lacy, Jr.(1)....... 52 Director
Frank W. Miller(1)................... 52 Director
</TABLE>
- ---------------
(1) Member of the Audit and Compensation Committees.
Mr. Cameron co-founded the Company in August 1993, and has served as a
director and Chairman of the Board of the Company since its formation. From
October 1988 to the present, Mr. Cameron has served as the managing general
partner of EBD, L.P., the general partner of The Airlie Group, L.P., a private
investment limited partnership; from June 1984 to the present, as the general
partner of BMA, the general partner of Investment Limited Partnership, a private
investment limited partnership; and from December 1995 to the present, as
managing member of Airlie Enterprises LLC, a private consulting company ("Airlie
Enterprises"). Mr. Cameron holds a B.A. from Middlebury College and an M.B.A.
from Boston University. In 1983, Mr. Cameron was diagnosed with multiple
sclerosis. See "Business -- Business Factors -- Need to Recruit and Retain
Management, Technical and Sales Personnel" and "-- Control by Principal
Stockholders."
Mr. McKenna co-founded the Company in August 1993, and has served as a
Director and as President of the Company since its inception and as Chief
Executive Officer since April 1996. From March 1989 to March 1993, Mr. McKenna
held various positions with JWPIS, including Executive Vice President of Sales
21
<PAGE> 22
and Marketing, President of the Integration Services Division, and most recently
as Senior Executive Vice President. Mr. McKenna holds a B.A. from Trinity
College.
Mr. Ghazey joined the Company as Executive Vice President, Finance and
Administration, Chief Financial Officer and Director in January 1997. Mr. Ghazey
served as President, Chief Operating Officer and a Director for Darling
International, a publicly-owned food waste recycler, from 1993 to December 1996,
and as Executive Vice President, Chief Financial Officer and Treasurer of
Darling International from 1990 to 1992. Mr. Ghazey is a Certified Public
Accountant and holds a B.S. in accounting from the University of Vermont.
Mr. Allardyce joined the Company in February 1995 as Executive Vice
President, Operations. From January 1993 to February 1995, Mr. Allardyce served
as Senior Vice President of the TSI Business Unit at THORN Americas, Inc., a
consumer rental company. From March 1982 to December 1992, Mr. Allardyce was
employed by The Southland Corporation, an operator of convenience stores, most
recently as Vice President of Distribution, Manufacturing and Procurement. Mr.
Allardyce holds a B.B.A. in Industrial Management from the University of Texas.
Mr. Csira joined the Company as Vice President, West Operations in August
1993 in connection with the acquisition of JWPIS and served as Senior Vice
President, West Operations from October 1995 to November 1996 and has served as
Executive Vice President, Operations since November 1996. From July 1989 to
August 1993, Mr. Csira served in various sales and management positions with
JWPIS, most recently as Vice President, West Operations. Prior to joining JWPIS,
Mr. Csira served as Vice President of sales for Clancy-Paul, a New Jersey-based
computer reseller. Mr. Csira holds a B.S. in Business Administration from the
University of Southern California.
Mr. Johnson joined the Company in November 1994 as Senior Vice President,
Human Resources. From May 1993 to May 1994, Mr. Johnson served as Senior Vice
President, Human Resources, Corporate for R.H. Macy, Inc., a department store
operator. From April 1991 to May 1993, Mr. Johnson served as Senior Vice
President, Human Resources for Saks Fifth Avenue, a specialty store operator.
Mr. Johnson holds a B.S. in Industrial Engineering and an M.B.A. from the
University of Florida.
Mr. Lyons joined the Company in April 1994 as Vice President, Marketing and
has served as Senior Vice President, Sales and Marketing since October 1996.
From August 1993 until March 1994, Mr. Lyons was Vice President, Sales and
Marketing for Carrabassett Spring Water. From July 1976 to July 1993, Mr. Lyons
held various sales and marketing management positions at IBM. Mr. Lyons holds a
B.S. in marketing from Syracuse University.
Mr. Nathanson joined the Company in July 1996 as Senior Vice President,
Network and Professional Services in connection with the Company's acquisition
of FCP, a network integration and professional services consulting firm and has
served as Senior Vice President, Services since April 1997. From February 1984
to July 1996, Mr. Nathanson served as President and Chief Executive Officer of
FCP.
Mr. Devening has served as a Director of the Company since June 1996. Since
August 1994, Mr. Devening has served as Chairman, President and Chief Executive
Officer of Foodbrands America, Inc., a diversified food manufacturing company.
From April 1993 to July 1994, Mr. Devening served as Vice Chairman and Chief
Financial Officer of Fleming Companies, Inc., a food distribution and marketing
company. From July 1989 to March 1993, Mr. Devening served as Executive Vice
President and Chief Financial Officer at Fleming Companies, Inc. Mr. Devening
holds a B.A. from Stanford University and an M.B.A. from the Harvard Graduate
School of Business. Mr. Devening serves as a director of Hancock Fabrics Inc.,
as well as numerous private companies.
Mr. Lacy has served as a Director of the Company since June 1996. From July
1985 until May 1996, Mr. Lacy served as the Chief Executive Officer and Chairman
of Ingram Micro Inc. and its predecessor company Micro D Inc., a distributor of
microcomputer products. From December 1993 to January 1996, Mr. Lacy served as
President of Ingram Industries, the holding company of Ingram Micro Inc., and
continues to serve as a director of Ingram Industries. From June 1995 to April
1996, he served as the Chief Executive Officer of Ingram Industries. From
October 1996 to October 1997, Mr. Lacy served as President and Chief
22
<PAGE> 23
Executive Officer of MicroWarehouse, a direct marketer of computer products. Mr.
Lacy holds a B.S. in Chemical Engineering and an M.B.A. from the University of
Virginia. Mr. Lacy serves as a director of Earthlink and Micro Warehouse.
Mr. Miller has served as a Director of the Company since September 1994.
Since January 1995, Mr. Miller has served as President of Miller Associates,
Inc., a management consulting firm. From February 1990 to December 1994, Mr.
Miller served as the Vice Chairman and Chief Executive Officer of Darling
International, a publicly owned food waste recycling company. Mr. Miller holds a
B.S. in Industrial Management from the Lowell Technological Institute. Mr.
Miller serves on the boards of directors of several private companies.
The Company currently has six directors. All directors serve on the Board
of Directors of the Company until the next annual meeting of the stockholders of
the Company, and until their successors are elected and qualified. There are no
family relationships among any of the directors or executive officers of the
Company. The Company's executive officers serve at the discretion of the Board
of Directors.
In June 1996, the Board of Directors established an Audit Committee and a
Compensation Committee. The Audit Committee is currently comprised of Messrs.
Devening, Lacy and Miller and is chaired by Mr. Miller. The Audit Committee
oversees the activities of the Company's independent auditors and reviews the
Company's internal accounting procedures and controls. The Compensation
Committee is currently comprised of Messrs. Devening, Lacy and Miller and is
chaired by Mr. Devening. The Compensation Committee makes recommendations to the
Board of Directors with respect to general compensation and benefit levels and
other related matters, reviews and approves the compensation and benefits for
the Company's executive officers, administers the Company's stock purchase and
stock option plans and makes recommendations to the Board of Directors regarding
such matters.
23
<PAGE> 24
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
by the Company during the Company's fiscal year ending June 29, 1997 to the
Company's Chief Executive Officer, and each of the Company's four other most
highly compensated executive officers (collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARD
------------
ANNUAL COMPENSATION SECURITIES
FISCAL --------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(1)
- --------------------------------------------------- ------ --------- ------- ------------
<S> <C> <C> <C> <C>
John A. McKenna, Jr. .............................. 1997 357,199 150,171 --
President and Chief Executive Officer
Kenneth Ghazey(2).................................. 1997 130,246 -- 880,000
Executive Vice President, Finance and
Administration, and Chief Financial Officer
Dale H. Allardyce.................................. 1997 239,623 135,371 --
Executive Vice President, Operations
David J. Csira..................................... 1997 226,999 116,877 100,000
Executive Vice President, Field Operations
Richard Nathanson.................................. 1997 258,048 193,787(3) 187,395
Senior Vice President, Services
</TABLE>
- ---------------
(1) The stock options listed in the table represent options to purchase Common
Stock of the Company under the Company's 1996 Performance Incentive Plan
("PIP") or the Company's 1996 Stock Option Plan (the "EIS Plan") and reflect
the nine-for-one stock dividend of Common Stock effected by the Company on
August 15, 1995 and the four-for-one stock dividend of Common Stock effected
by the Company on November 25, 1997.
(2) Mr. Ghazey was appointed Executive Vice President, Finance and
Administration and Chief Financial Officer in January 1997.
(3) Includes $120,787 bonus payable by FCP at the time of the acquisition and
paid by the Company after the closing.
24
<PAGE> 25
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth for each of the Named Officers who received
options granted during the fiscal year ended June 29, 1997 certain information
concerning such grants and reflects the nine-for-one stock dividend of Common
Stock effected by the Company on August 15, 1995 and the four-for-one stock
dividend of Common Stock effected by the Company on November 25, 1997:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE OF ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO PRICE TERM(3)
OPTIONS EMPLOYEES PER EXPIRATION -----------------------
NAME GRANTED IN 1997 SHARE(1) DATE(2) 5%($) 10%($)
- ------------------------- --------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kenneth A. Ghazey(4)..... 880,000 43.21% $ 2.04 5/27/07 1,127,885 2,858,281
David J. Csira(5)........ 100,000 4.91 2.04 6/26/07 128,169 324,805
Richard Nathanson........ 154,885(6) 7.61 2.04 7/10/01 87,209 192,712
32,510(7) 1.60 2.04 8/01/01 18,305 40,450
</TABLE>
- ---------------
(1) In determining the fair market value of the Company's Common Stock, the
Board of Directors considered various factors, including the Company's
financial condition and business prospects, its operating results, the
absence of a market for its Common Stock, the risks normally associated with
investments in companies engaged in similar businesses and the market prices
of securities of certain competitors. The exercise price for options granted
under the PIP may be paid in any form as shall be permitted by the Company's
Compensation Committee of the Board of Directors, including without
limitation cash, shares of the Company's Common Stock, other awards granted
or other property, including promissory notes. The exercise price for
options granted under the EIS Plan may be paid in cash or other property
including promissory notes, shares of the Company's Common Stock, or any
form of "cashless" exercise, including by net exercise, as shall be
permitted by the Company's Compensation Committee of the Board of Directors.
(2) Options may terminate before their expiration dates if the optionee's status
as an employee or consultant is terminated or upon the optionee's death or
disability. Options must generally be exercised within 30 days of the
termination of the optionee's status as an employee or consultant of the
Company, or within 12 months after such optionee's death or disability. If,
however, an optionee is terminated for cause, all vested options shall be
canceled on the date of grant.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the Company's future
Common Stock prices.
(4) Represents (i) 147,200 shares of the Company's Common Stock subject to an
incentive stock option, (ii) 352,800 shares of the Company's Common Stock
subject to a non-qualified stock option and (iii) 380,000 shares of the
Company's Common Stock subject to a performance stock option. All options
were granted pursuant to the Company's PIP. One-third of each of the
incentive stock option and the non-qualified stock option vested immediately
upon grant and additional one-third of such options shall vest after each
anniversary of January 6, 1997. The performance stock option shall vest 100%
on May 27, 2004, provided, however, that vesting may be accelerated based on
the value of the Company's Common Stock.
(5) Represents incentive stock option granted pursuant to the Company's PIP.
One-third of such option vested immediately upon grant and additional
one-third of such option shall vest after each anniversary of June 26, 1997.
(6) Represents a non-qualified stock option granted pursuant to the Company's
EIS Plan. One-half of such option shall vest on July 10, 1998 and the
remaining portion shall vest on July 10, 1999.
(7) Represents a non-qualified stock option granted pursuant to the Company's
EIS Plan. One-half of such option shall vest on August 1, 1998 and the
remaining portion shall vest on August 1, 1999.
25
<PAGE> 26
DIRECTOR COMPENSATION
The Company does not pay cash compensation to its directors. However, under
the Company's 1996 Non-Employee Director Stock Plan, each non-employee director
receives an annual retainer and fees for each Board or committee meeting in the
form of shares of the Company's Common Stock. In addition, the Company
reimburses directors for expenses incurred in attending board and committee
meetings.
Since inception, the Company has paid Mr. Cameron a salary for services
rendered in his capacity as Chairman of the Board. During fiscal 1997, his
annual salary was $400,000.
EMPLOYMENT AGREEMENTS
The Company has entered into agreements with certain of the Company's
executive officers, including John A. McKenna, Jr., the Company's President and
Chief Executive Officer, Kenneth A. Ghazey, the Company's Executive Vice
President, Finance and Administration and Chief Financial Officer, Dale H.
Allardyce, the Company's Executive Vice President, Operations, David J. Csira,
the Company's Executive Vice President, Field Operations and Richard Nathanson,
the Company's Senior Vice President, Services.
Mr. McKenna's severance agreement provides that upon a Severance Event (as
defined below), he will be entitled to a payment equal to 12 times his monthly
compensation as of the date of termination (including his bonus or any variable
compensation at 100% of target). In addition, if a Severance Event occurs or Mr.
McKenna's employment is terminated prior to a public offering or change of
control (as defined below) and the Company elects to repurchase his shares of
Common Stock pursuant to the Stockholders' Agreement, Mr. McKenna shall be
entitled to receive (i) the difference between the book value as of the end of
the most recent fiscal year and the Share Value (as defined below) and (ii) a
tax gross-up for the difference between ordinary income tax treatment and
capital gains tax treatment resulting from such repurchase, computed to put Mr.
McKenna in the same position he would have been in if he had timely made an IRC
Section 83(b) election. A "Severance Event" is defined as (i) a termination for
any reason other than cause or as a result of his death, disability or voluntary
resignation or (ii) a change of control which results in a reduction of his base
compensation, a reduction in the level of authority or scope of responsibilities
or relocation. The agreement provides for the acceleration of the vesting period
pertaining to stock options granted to him in addition to extending his exercise
period to two years after termination in the event of a Severance Event. Mr.
McKenna's severance agreement terminates on August 6, 2000.
Mr. Ghazey's at-will employment agreement provides for an annual base
salary of $275,000 and participation in the ENTEX Management Incentive Plan at a
target bonus of 50% of his base salary for 100% achievement of established
goals. In addition, Mr. Ghazey's employment agreement provides that upon (i) the
termination of his employment by the Company for other than cause or as a result
of death, disability or voluntary resignation, (ii) a change of control (as
defined below) or (iii) a unilateral decrease in his aggregate compensation,
benefits and incentive package which is not uniformly applied to all other
senior executive officers, he will be entitled to one year's base salary at the
then current rate and all incentive compensation earned but not paid and under
the Management Incentive Plan then in effect.
Mr. Allardyce's agreement is effective until 24 months following a change
of control (as defined below) or until November 30, 1998 if no change of control
has occurred by such date. Mr. Allardyce's retention agreement provides that
upon a change of control followed by (i) a termination for other than cause or
as a result of his death, disability or voluntary resignation, (ii) a reduction
in his compensation, (iii) a reduction in the level of authority or scope of
responsibilities or (iv) a relocation, he will be entitled to 12 times his
monthly compensation as of the date of termination (including his bonus at 100%
of target).
Mr. Csira's at-will employment agreement provides for an annual base salary
of $250,000 and participation in the ENTEX Management Incentive Plan at a target
bonus of 50% of his base salary for 100% achievement of established goals. In
addition, Mr. Csira's employment agreement provides that if he is terminated
following a change in control (as defined below), other than for cause, he is
entitled to one year base salary then in effect plus bonus at 100% of target.
Mr. Nathanson's employment agreement provides for a monthly base salary of
$18,333, participation in
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the ENTEX Management Incentive Plan at a target bonus of not less than 50% of
his base salary and $1,000 per month for mortgage expenses. In addition, Mr.
Nathanson's employment agreement provides that upon termination without cause,
he will be entitled to severance payments equal to 12 times his monthly
compensation as of the date of termination plus bonus at 100% of target. Mr.
Nathanson is subject to a covenant not to compete until the later of July 1999
or one year after his employment with the Company is terminated.
A "change of control" for purposes of Mr. McKenna's and Mr. Csira's
agreements is defined as an event in which the Cameron Affiliates no longer own
voting securities of the Company entitled to cast a majority of votes for
election of the Board of Directors of the Company. A "change of control" for
purposes of Mr. Allardyce's and Mr. Ghazey's agreements is defined as a transfer
of ownership or control of more than 50% of all of the assets or shares of the
Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Share Ownership.
Dort A. Cameron III, the Company's Chairman, owns of record 3,500,000
shares of the Company's Common Stock. In addition, ENTEX Associates, L.P., a
Delaware limited partnership, owns 21,500,000 shares of the Company's Common
Stock. Mr. Cameron is the sole stockholder of The Putnam Group, Inc., the
general partner of ENTEX Associates, L.P. (the "Putnam Group"). Two of the
limited partners of ENTEX Associates, L.P., Airlie Associates and Airlie
Associates II, are general partnerships consisting of Mr. Cameron's relatives.
The other limited partners of ENTEX Associates, L.P. are business associates of
Mr. Cameron. Mr. Cameron has voting and dispositive power over the shares of the
Company's Common Stock held by ENTEX Associates, L.P. and, accordingly, may be
deemed to have beneficial ownership with respect to these shares. In connection
with the restructuring of indebtedness under the IBMCC Financing Agreement in
December 1996, Mr. Cameron and ENTEX Associates, L.P., along with Mr. McKenna,
have pledged the Common Stock held by each to IBMCC as additional collateral.
See "-- IBMCC Financing."
Indebtedness Between the Company and Certain Affiliates
In July 1993, Mr. Cameron, Airlie Associates and Airlie Associates II
loaned $3.13 million, $340,000 and $780,000, respectively, to ENTEX Holdings. In
addition, Mr. Cameron, in December 1993, loaned ENTEX Holdings $312,500. These
loans are evidenced by promissory notes (the "1993 Notes"). The 1993 Notes
issued in July 1993 are due on July 29, 2000 and the 1993 Note issued in
December 1993 is due on August 6, 2000. The 1993 Notes have been assumed by the
Company and $415,925 principal amount repaid in connection with the merger of
ENTEX Holdings with and into the Company on June 28, 1996 (the "Holdings
Merger"). Interest on the 1993 Notes is payable quarterly at a rate equal to the
prime rate plus 2.50%. On August 6, 1993, the Company borrowed $5.3 million from
Citibank N.A. to partially finance the acquisition of JWPIS. Mr. Cameron
personally guaranteed the repayment of this loan. In connection with the
Holdings Merger, the outstanding balance of this loan, approximately $4.1
million, was repaid.
Payments to Affiliates
From December 1993 to December 1995, ENTEX Holdings paid to the Putnam
Group a monthly overhead allocation fee of $15,000 for a total of $360,000. Such
monthly fee was paid by ENTEX Holdings to Airlie Enterprises from January 1996
to June 1996, and by the Company to Airlie Enterprises from July 1996 to the
present. In addition, in October 1995, ENTEX Holdings paid a consulting fee to
Airlie Enterprises the amount of $500,000.
Transfer of Entex Holdings Investments; Assets
During fiscal years 1994, 1995 and 1996, ENTEX Holdings invested $335,000
in National Teacher Academy, Inc. in exchange for promissory notes and shares
representing 51% of the outstanding capital stock of National Teacher Academy,
Inc. In connection with the Holdings Merger, ENTEX Holdings transferred to Mr.
Cameron the promissory notes and stock of National Teacher Academy, Inc. in
exchange for a $335,000
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reduction in the amounts outstanding under the 1993 Notes. In July 1994, ENTEX
Holdings invested $50,000 in Russian Investors, L.P. in exchange for shares
representing approximately 10% of the profit of Russian Investors, L.P. In
connection with the Holdings Merger, ENTEX Holdings transferred to Mr. Cameron
the partnership interest of Russian Investors, L.P. in exchange for a $50,000
reduction in the amounts outstanding under the 1993 Notes. In June 1995, ENTEX
Holdings loaned a consultant to the Company $30,925. In connection with the
Holdings Merger, Mr. Cameron acquired the loan in exchange for a $30,925
reduction in Mr. Cameron's 1993 Note. In April 1996, the Company sold to
Knowledge Alliance Holdings, Inc. ("KAH"), a corporation controlled by the
Cameron Affiliates, the PC training business which the Company had previously
acquired in connection with the merger of Random Access. The book value of such
business was $1.1 million at the time of the transfer to KAH. In consideration
for this transfer, the Company received shares of KAH representing 25% of its
then outstanding capital stock. The Company also entered into an agreement with
KAH to market these training services. The agreement granted the Company an
option to purchase up to an additional 2,500 shares of common stock of KAH
depending on the level of sales of such training services by the Company. KAH
was granted the option to purchase the assets of the training business conducted
by the Company in Minneapolis, Minnesota for book value of such assets on the
date of acquisition. This option was exercised on August 1, 1996.
Stockholders' Agreement.
On December 10, 1993, ENTEX Holdings, Dort A. Cameron III, ENTEX
Associates, L.P. and the Participants entered into the Stockholders' Agreement
in connection with the sale and purchase of a total of 5,930,690 shares, net of
repurchases, of the Common Stock (the "Original Shares") of ENTEX Holdings by
the Participants. The Stockholders' Agreement is binding on the Company as the
successor corporation of ENTEX Holdings and all obligations of the Participants
and the Cameron Affiliates relating to the shares of Common Stock of ENTEX
Holdings relate to the shares of Common Stock of the Company. Pursuant to the
Stockholders' Agreement, each of the Cameron Affiliates and each of the
Participants agreed to vote their shares of Common Stock to elect one
Participant nominated by the Participants and acceptable to the Cameron
Affiliates to the Board of Directors of the Company. In addition, in the event
of (i) any proposed capital reorganization of the Company, (ii) any
reclassification or recapitalization of the Company, (iii) any transfer of all
or substantially all of the assets of the Company, (iv) any consolidation or
merger involving the Company and any other person, (v) any dissolution,
liquidation or winding-up of the Company, or (vi) any material transaction
affecting the capital stock of the Company which is not in the ordinary course
of business and which is required by the laws of Delaware to be submitted to a
vote of the stockholders of the Company, the Participants agreed to vote their
shares of Common Stock in the same manner as the Cameron Affiliates.
In addition, pursuant to the Stockholders' Agreement, in the event that the
employment of certain Participants including Dale Allardyce (the "Plan 1
Participants") is terminated for death, disability or cause, the Company will
have the right to purchase all of the shares of Common Stock of such
Participants. Upon termination as a result of death or disability the Plan 1
Participants and their legal representatives will have the right to require the
Company to purchase all of their shares of Common Stock. The per share price to
be paid by the Company shall equal the greater of the Original Purchase Price
(as defined below) or the Share Value (as defined below). The Company will have
the right to purchase shares of Common Stock if a Participant who is not a Plan
1 Participant, including John McKenna and David Csira (a "Plan 2 Participant")
is terminated for any reason. If a Plan 2 Participant's employment is terminated
for cause, the per share value shall equal the lesser of Original Purchase Price
and the Book Value (as defined below) and if for any other reason, shall equal
the Book Value. If the Company is not able to pay for a Participant's shares of
Common Stock in cash, the Company must assign its rights to the Cameron
Affiliates.
"Share Value" shall mean the amount determined by multiplying (a) the net
income of the Company on a consolidated basis for the four most recent fiscal
quarters of the Company immediately preceding the date of the termination of the
Plan 1 Participant's employment, as shown on the financial statements of the
Company, determined in accordance with GAAP, by (b) the Earnings Multiple, and
dividing the product so obtained by the number of shares of Common Stock issued
and outstanding on a fully diluted basis. "Earnings Multiple" shall mean the
arithmetic average of the "price to earnings ratio" of each of certain publicly
traded companies
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as reported in composite transactions in the Wall Street Journal on the last
day of each of the six calendar months immediately preceding the date of
repurchase of such Common Stock. "Original Purchase Price" shall mean the
original purchase price paid for the Original Shares, as adjusted to reflect the
nine-for-one stock dividend of Common Stock effected by ENTEX Holdings on August
15, 1995 and the four-for-one stock dividend of Common Stock effected by the
Company on November 25, 1997. "Book Value" shall mean the book value of a share
of Common Stock as of the end of the most recent fiscal year.
The Stockholders' Agreement will terminate upon the consummation of a
public offering; provided, that the voting provisions shall terminate upon the
earlier of (a) the consummation of a public offering or (b) December 10, 2000,
and provided, further that certain provisions relating to the Company's right to
repurchase a Participant's shares of Common Stock shall terminate upon the
earlier of (x) the consummation of a public offering or (y) a change of control.
A "change of control" is defined as an event in which the Cameron Affiliates no
longer own voting securities of the Company entitled to cast a majority of votes
for election of the Board of Directors of the Company.
IBMCC Financing.
The Company has financed a significant portion of its working capital needs
under the IBMCC Financing Agreement. IBMCC is the beneficial owner of more than
5% of the outstanding capital stock of the Company. The IBMCC Financing
Agreement provides for borrowings under the IBMCC Working Capital Line of Credit
of up to $525.0 million, the interest bearing portion of which was $333.3
million as of September 28, 1997. The amount of available borrowings under the
IBMCC Financing Agreement may be adjusted upwards for higher seasonal purchasing
requirements, and may be reduced or terminated by IBMCC upon 60 days prior
written notice. Amounts outstanding under the IBMCC Working Capital Line of
Credit bear interest at the prime rate plus .50% (9.0% at September 28, 1997).
In connection with the Company's acquisition of Random Access in September 1995,
the IBMCC Financing Agreement was amended to provide for the IBMCC Long-Term
Loan in the original principal amount of $20 million. The IBMCC Long-Term Loan
is required to remain outstanding unless there are no outstanding interest
bearing advances under the IBMCC Financing Agreement. The IBMCC Financing
Agreement was further amended in December 1996 and July 1997 to provide for the
Short-Term Loan in the original principal amount of $55 million and the Special
Working Capital Advance in the original principal amount of $20 million. The
December 1996 and 1997 amendments also included favorable revisions to the
financial covenant requirements and the payment schedule for the Company,
including agreements to waive all financial covenant defaults pertaining to
fiscal 1997. The Short-Term Loan was repaid in full subsequent to September 28,
1997. Amounts outstanding under the IBMCC Long-Term Loan and Special Working
Capital Advance bear interest at the prime rate plus 2.50% (11.0% at September
28, 1997). At September 28, 1997, $17.3 million of principal was outstanding
under the IBMCC Long-Term Loan, $27.5 million of principal was outstanding under
the Short-Term Loan and $20.0 million of principal was outstanding under the
Special Working Capital Advance. The IBMCC Financing Agreement provides that if
Dort A. Cameron III ceases to own and/or control at least 35% of the issued and
outstanding capital stock of the Company, the Company will be deemed to be in
default. In connection with the financing arrangement, Mr. Cameron has granted
to IBMCC an option to acquire 1,851,850 shares of Common Stock held by him. The
option is immediately exercisable at a price of $.02 per share and expires July
15, 2001. IBMCC holds a warrant to purchase up to 333,350 shares of the
Company's Common Stock which was committed to by Entex Holdings in August 1993
and issued in November 1994 in connection with a settlement of a dispute
between International Business Machines Corporation, JWPIS and ENTEX Holdings.
In connection with the restructuring of indebtedness under the IBMCC Financing
Agreement in December 1996, Mr. Cameron, Mr. McKenna and ENTEX Associates, L.P.
have pledged the Common Stock held by each to IBMCC as additional collateral. In
connection with an amendment to the IBMCC Financing Agreement on July 15, 1997
the Company entered into a warrant agreement pursuant to which IBMCC was issued
warrants to acquire up to 250,855 shares of Common Stock. All warrants issued
to IBMCC under the warrant agreement may be exercised at any time prior to
July 31, 2004 at an exercise price of $7.55. In addition, under the warrant
agreement, IBMCC was granted the right to sell the Common Stock issuable upon
exercise of the warrants (the "Warrant Shares") along with any sale of Common
Stock representing more than 20% of the capital stock of the Company held by
the Cameron Affiliates. Mr. Cameron has a right to require IBMCC to sell the
Warrant Shares along with any sale of Common Stock representing 50% or more of
the capital stock of the Company by the Cameron Affiliates. IBMCC was also
granted certain demand and piggyback registration rights for the Warrant
Shares. See "Business -- Business Factors", "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and Note 7 of the Notes to Consolidated Financial Statements.
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ITEM 8. LEGAL PROCEEDINGS
The Company is engaged in legal actions arising in the ordinary course of
business but is not currently a party to any legal actions which could have a
material adverse effect on its business, financial condition or results of
operations.
ITEM 9.MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
As of November 30, 1997, the Company had outstanding 32,399,060 shares of
Common Stock held by 2,177 stockholders and no shares of Preferred Stock. There
is no established public trading market for any class of the Company's equity
securities.
The Company has not paid any dividends on any of its capital stock and does
not anticipate that any cash dividends will be declared in the foreseeable
future. The IBMCC Financing Agreement prohibits the payment of dividends.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
From June 30, 1993 through November 30, 1997, ENTEX Holdings and the
Company issued and sold the following securities (as adjusted, in the case of
equity securities, to reflect the nine-for-one stock dividend of Common Stock
effected by ENTEX Holdings on August 15, 1995 and the four-for-one stock
dividend of Common Stock effected by the Company on November 25, 1997):
(a) In August 1993, ENTEX Holdings issued 3,500,000 shares of Common
Stock to Dort A. Cameron III in exchange for 3,500 shares of Common Stock
of the Company.
(b) In August 1993, ENTEX Holdings issued 750,000 shares of Common
Stock to ENTEX Associates, L.P. in exchange for 750 shares of Common Stock
of the Company.
(c) In August 1993, ENTEX Holdings issued and sold 20,750,000 shares
of Common Stock to ENTEX Associates, L.P. for an aggregate purchase price
of $415,000.
(d) From December 1993 through June 1997, ENTEX Holdings and the
Company issued to approximately 76 key employees an aggregate of 5,930,690
shares of Common Stock, net of repurchases, for an aggregate purchase price
of $118,614. At the same time, Entex Holdings issued promissory notes in
the aggregate principal amount of $770,991 for cash and notes of such
employee purchasers.
(e) From December 1993 to June 1996, ENTEX Holdings issued to
approximately 2,100 employees of the Company, 1,260,500 Share Units, net of
repurchases, with each Share Unit representing a right to receive one share
of Common Stock of ENTEX Holdings or an equivalent amount of cash, at the
election of ENTEX Holdings pursuant to the ENTEX Share Plan.
(f) In July 1994, ENTEX Holdings issued warrants for purchase of
333,350 shares of Common Stock to IBMCC which are currently exercisable at
$.20.
(g) In January 1995, the Company issued options to purchase up to
166,650 shares of Common Stock to an employee and from April 1996 to May
1997, the Company issued 166,650 shares of Common Stock to such employee
pursuant to the exercise of such options.
(h) From February 1996 to June 1996, the Company issued an aggregate
of 2,846,260 options with exercise prices ranging from $4.63 to $9.02, net
of forfeitures, to purchase shares of Common Stock to officers, employees,
consultants and directors pursuant to the ENTEX Holdings, Inc. 1996 Stock
Option Plan, as amended.
(i) In June 1996, ENTEX Holdings issued warrants for the purchase of
375,000 shares of Common Stock to Microsoft Corporation which were
exercisable at $14.40 per share. In November 1997, these warrants were
canceled and new warrants were issued. See 10(p) below.
(j) In connection with the Holdings Merger, the Company exchanged all
outstanding shares of Common Stock of ENTEX Holdings for shares of Common
Stock of the Company on a one-for-one
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basis. In addition, the Company exchanged all outstanding Share Units of
ENTEX Holdings for an equivalent number of shares of the Company's Common
Stock.
(k) From July 1996 to August 1996, the Company issued an aggregate of
812,795 options wtih exercise prices ranging from $2.04 to $9.38, net of
forfeitures, to purchase shares of Common Stock to officers, employees,
consultants and former employees of FCP pursuant to the EIS Plan.
(l) From May 1997 to November 1997, the Company issued an aggregate of
2,362,000 options with exercise prices ranging from $2.04 to $4.63, net of
forfeitures, to purchase shares of Common Stock to officers, employees and
consultants pursuant to the PIP.
(m) In June 1997, the Company issued 41,220 shares to Non-employee
Directors pursuant to the Non-employee Director Share Plan.
(n) In July 1997, the Company issued warrants for purchase of 167,235
shares of Common Stock to IBMCC which are currently exercisable at $7.55
per share.
(o) In October 1997, the Company issued warrants for purchase of
83,620 shares of Common Stock to IBMCC which are currently exercisable at
$7.55 per share.
(p) In November 1997, the Company issued warrants for purchase of
715,230 shares of Common Stock to Microsoft Corporation which are currently
exercisable at $7.55 per share. See note 10(i) above.
The issuances of the securities described in Items 15(a), (b), (c), (d),
(f), (g), (i), (n), (o) and (p) were deemed to be exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act") in reliance on
Section 4(2). The issuance of the securities described in Items 15(e), (h), (k),
(l) and (m) were deemed to be exempt from registration under the Securities Act
in reliance on Rule 701 promulgated thereunder. The issuance of the securities
described in Item 15(j) were deemed to be exempt from registration under the
Securities Act in reliance on Section 3(a)(9). The recipients of securities in
each such transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions. All recipients had access, through
their relationships with the Company, to information about the Company.
ITEM 11. DESCRIPTION OF COMPANY'S SECURITIES TO BE REGISTERED
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, $0.0001 per share par value, and 2,000,000 shares of
undesignated Preferred Stock, $0.0001 per share par value.
The following summary of certain provisions of the Common Stock does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Company's Certificate of Incorporation, as amended, which is
included as an exhibit to this Registration Statement, and by the provisions of
applicable law.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. The holders of Common
Stock shall receive dividends as and when declared by the Board of Directors out
of funds legally available for the payment of dividends. See "Market Price of
and Dividends on the Company's Common Equity and Related Stockholder Matters."
In the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets. Holders of
Common Stock have no preemptive rights or rights to convert their Common Stock
into any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and non-assessable.
Pursuant to the Stockholders' Agreement, each of the Cameron Affiliates and
each of the Participants agreed to vote their shares of Common Stock to elect
one Participant nominated by the Participants and acceptable to the Cameron
Affiliates to the Board of Directors of the Company. In addition, in the event
of (i) any proposed capital reorganization of the Company, (ii) any
reclassification or recapitalization of the Company, (iii) any transfer of all
or substantially all of the assets of the Company, (iv) any consolidation or
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merger involving the Company and any other person, (v) any dissolution,
liquidation or winding-up of the Company, or (vi) any material transaction
affecting the capital stock of the Company which is not in the ordinary course
of business and which is required by the laws of Delaware to be submitted to a
vote of the stockholders of the Company, the Participants agreed to vote their
shares of Common Stock in the same manner as the Cameron Affiliates. See
"Certain Relationships and Related Transactions."
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Certificate of Incorporation authorizes the issuance of
additional shares of Common Stock, without stockholder approval. The Company's
Bylaws do not permit anyone other than the Board of Directors, the Chairman of
the Board or the President to call special meetings of the stockholders. These
provisions could discourage potential acquisition proposals and could delay or
prevent a change in control of the Company. Such provisions also may have the
effect of preventing changes in the management of the Company.
DELAWARE TAKEOVER STATUTE
The Company is subject to Section 203 of the DGCL ("Section 203") which,
subject to certain exceptions, prohibits a Delaware corporation from engaging in
any business combination with any interested stockholder for a period of three
years following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder; (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
(x) by persons who are directors and also officers and (y) by employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition involving the interested stockholder
of 10% or more of the assets of the corporation; (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the DGCL, the Company's Certificate of
Incorporation, as amended, includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of their duty of
care. In addition, as permitted by Section 145 of the DGCL, the Bylaws of the
Company provide that: (i) the Company is required to indemnify its directors and
officers and persons serving in such capacities in other business enterprises
(including, for example, subsidiaries of the Company) at the Company's request,
to the fullest extent permitted by Delaware law; (ii) the Company is required to
indemnify its directors and officers and persons serving in such capacities in
other business enterprises at the Company's request in connection with any
action, suit, or proceeding initiated by such person only if such initiation was
authorized
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by the Board of Directors; (iii) the Company may, in its discretion, indemnify
employees and agents in those circumstances where indemnification is not
required by law; (iv) the Company is required to advance expenses, as incurred,
to its directors and officers in connection with defending a proceeding; (v) the
rights conferred in the Bylaws are not exclusive; and (vi) the Company may not
retroactively amend the Bylaw provisions in a way that is adverse to such
directors, officers and employees.
The Company's policy is to enter into indemnification agreements with each
of its directors and officers that provide the maximum indemnity allowed to
directors and officers by Section 145 of the DGCL and the Bylaws, as well as
certain additional procedural protections. In addition, the indemnification
agreements provide that directors and officers will be indemnified to the
fullest possible extent not prohibited by law against all expenses (including
attorney's fees) and settlement amounts paid or incurred by them in any action
or proceeding, including any action by or in the right of the Company, arising
out of such person's services as a director, officer, employee, agent or
fiduciary of the Company, any subsidiary of the Company or any other company or
enterprise to which such person provides services at the request of the Company
unless a reviewing party as appointed by the Board of Directors determines that
the Company is not obligated to indemnify under applicable law. The Company will
not be obligated pursuant to the indemnification agreements to indemnify or
advance expenses to an indemnified party with respect to proceedings or claims
initiated by the indemnified party and not by way of defense, except with
respect to proceedings specifically authorized by the Board of Directors or
brought to enforce a right to indemnification under the indemnification
agreement, the Company's Bylaws or any statute or law or as otherwise required
under Section 145 of the DGCL. Under the agreements, the Company is not
obligated to indemnify the indemnified party (i) for any expenses incurred by
the indemnified party with respect to any proceeding instituted by the
indemnified party to enforce or interpret the agreement, if a court having
jurisdiction determines that each of the material assertions made by the
indemnified party in such proceeding was not made in good faith or was
frivolous; (ii) for any expenses incurred by the indemnified party with respect
to any proceeding instituted by or in the name of the Company to enforce or
interpret the agreement, if a court of competent jurisdiction determines that
each of the material defenses made by the indemnified party in such proceeding
was made in bad faith or was frivolous; (iii) for any amounts paid in settlement
of a proceeding unless the Company consents to such settlement; (iv) for any
expenses resulting from acts, omissions or transactions for which a court having
jurisdiction makes a final judicial determination that the indemnified party is
prohibited from receiving indemnification under the agreement or applicable law;
or (v) on account of any suit in which judgment is rendered against the
indemnified party for an accounting of profits made from the purchase or sale by
the indemnified party of securities of the Company pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended, and related
laws.
The indemnification provisions in the Bylaws and the indemnification
agreements entered into between the Company and its directors and officers may
be sufficiently broad to permit indemnification of the Company's directors and
officers for liabilities arising under the Securities Act.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 15.
ITEM 14.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
33
<PAGE> 34
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS AND SCHEDULES
1. Financial Statements. The following Consolidated Financial
Statements of ENTEX Information Services, Inc. and the Report of
Independent Auditors are included at pages F-1 through F-18 of this
Registration Statement.
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
- ----------------------------------------------------------------------------------- --------
<S> <C>
Independent Auditors Report........................................................ F-1
Consolidated Balance Sheets as of September 28, 1997 (unaudited) and as of June 29,
1997 and June 30, 1996........................................................... F-2
Consolidated Statements of Operations for the Three Months ended September 28, 1997
and September 29, 1996 (unaudited) and for the Years Ended June 29, 1997, June
30, 1996 and July 2, 1995........................................................ F-3
Consolidated Statements of Cash Flows for the Three Months ended September 28, 1997
and September 29, 1996 (unaudited) and for the Years Ended June 29, 1997, June
30, 1996 and July 2, 1995........................................................ F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended June
29, 1997, June 30, 1996 and July 2, 1995......................................... F-5
Notes to Consolidated Financial Statements......................................... F-6
</TABLE>
2. Financial Statement Schedules. The following Consolidated Financial
Statement Schedules of ENTEX Information Services, Inc. are filed as part
of this Registration Statement and should be read in conjunction with the
Consolidated Financial Statements of ENTEX Information Services, Inc.
<TABLE>
<CAPTION>
DESCRIPTION PAGE NO.
- ----------------------------------------------------------------------------------- --------
<S> <C>
Schedule II -- Valuation and Qualifying Accounts and Reserves...................... II-1
</TABLE>
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or notes thereto.
(b) EXHIBITS
<TABLE>
<S> <C>
2.1(a) Agreement and Plan of Reorganization by and between ENTEX Holdings, Inc. and
the Company dated as of June 28, 1996.
2.2 Agreement and Plan of Merger by and among the Company, ENTEX Acquisition
Corp. and Random Access, Inc. and related amendment.
2.3 Agreement and Plan of Reorganization among the Company, EIS Acquisition
Corporation and FCP Technologies, Inc.
3.1(a) Certificate of Incorporation of the Company, as amended.
3.2(a) Bylaws of the Company.
4.1(a) Form of the Company's Common Stock Certificate.
10.1(a) Form of Indemnification Agreement entered into by the Company with each of
its directors and executive officers.
10.2(a) Agreement between John A. McKenna, Jr. and the Company dated August 7, 1994
and related amendment.
10.3(a) Letter Agreement between Kenneth A. Ghazey and the Company dated January 6,
1997.
</TABLE>
34
<PAGE> 35
<TABLE>
<S> <C>
10.4(a) Retention Agreement between Dale H. Allardyce and the Company dated November
17, 1997.
10.5(a) Letter Agreement between David J. Csira and the Company dated November 15,
1996.
10.6(a) Employment Agreement between Richard Nathanson and the Company dated July
10, 1996.
10.7(a) Stockholders' Agreement among Entex Holdings, Inc., Dort A. Cameron III and
Entex Associates, L.P. dated December 10, 1993 and related amendment.
10.8(b) ENTEX Holdings, Inc. 1996 Stock Option Plan and related agreements.
10.9(b) ENTEX Information Services, Inc. 1996 Stock Option Plan and related
agreements.
10.10(b) 1996 Performance Incentive Plan and related agreements.
10.11(a) 1996 Non-Employee Director Stock Plan.
10.12(a) ENTEX Management Incentive Plan.
10.13 Sublease Agreement dated June 6, 1997 between General Electric Company and
the Company and related consent.
10.14 Lease Agreement dated January 20, 1995 between Royal Executive Park II and
the Company and related amendment.
10.15 Sublease Agreement dated August 6, 1993 between JWP Inc. and the Company and
related amendments, consents and lease agreements.
10.16 Lease Agreement dated December 31, 1996 between the Company and Duke Realty
Limited Partnership and related amendments.
10.17 Lease Agreement dated May 15, 1995 between the Company and Duke Realty
Limited Partnership and related amendments.
10.18 Lease Agreement dated February 29, 1992 between the Company and 725 C.W.
Associates Limited Partnership and related amendments.
10.19 Dealer Loan and Security Agreement between FINOVA Capital Corporation and
the Company dated April 21, 1995 and Letter Agreements dated April 17, 1995
and May 17, 1996.
10.20 Fourth Amended and Restated Agreement for Wholesale Financing by and between
IBM Credit Corporation and the Company and related amendments.
10.21(a) Warrant Agreement between IBM Credit Corporation, Entex Holdings, Inc. and
the Company dated November 15, 1994.
10.22(a) Warrant Agreement between IBM Credit Corporation and the Company dated July
15, 1997.
11.1(a) Statement of computation of earnings per share.
21.1(a) Subsidiaries of the Company.
27.1(a) Financial Data Schedule.
</TABLE>
- ---------------
(a) Previously filed.
(b) Portion filed herewith and portion previously filed.
35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
ENTEX INFORMATION SERVICES, INC.
By: /s/ JOHN A. MCKENNA, JR.
------------------------------------
John A. McKenna, Jr., President
and Chief Executive Officer
Dated: January 28, 1998
36
<PAGE> 37
INDEPENDENT AUDITORS REPORT
The Board of Directors and Stockholders
ENTEX Information Services, Inc.
We have audited the consolidated balance sheets of ENTEX Information
Services, Inc. and subsidiaries as of June 29, 1997 and June 30, 1996 and the
related consolidated statements of operations, cash flows and stockholders'
equity for each of the years in the three-year period ended June 29, 1997. In
connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedule listed in Item 15(a)2. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express our
opinion on these consolidated financial statements and schedule based on our
audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ENTEX
Information Services, Inc. and subsidiaries as of June 29, 1997 and June 30,
1996, and the results of their operations and their cash flows for each of the
years in the three-year period ended June 29, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
Stamford, Connecticut
September 17, 1997, except as to note 13
which is as of November 28, 1997
F-1
<PAGE> 38
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 28, JUNE 29, JUNE 30,
1997 1997 1996
------------- -------- --------
<S> <C> <C> <C>
Current assets:
Cash................................................... $ 10,330 $ 15,838 $ 12,603
Trade receivables, net of allowance for doubtful
accounts of $4,526, $4,746 and $4,101,
respectively........................................ 327,723 334,196 295,011
Vendor receivables, net of allowance of $2,000, $2,000
and $0 respectively................................. 33,481 37,789 21,340
Inventories............................................ 184,408 183,957 171,453
Other current assets................................... 8,302 9,228 8,334
-------- -------- --------
Total current assets........................... 564,244 581,008 508,741
Property, plant and equipment, net....................... 54,894 55,049 44,812
Goodwill, net of accumulated amortization of $9,743,
$8,903 and $4,664, respectively........................ 45,047 45,887 35,319
Other assets, net........................................ 1,459 1,646 1,716
-------- -------- --------
Total assets........................................ $ 665,644 $683,590 $590,588
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 262,157 $269,962 $277,864
Accrued liabilities.................................... 60,660 53,598 29,952
Notes payable and current installments of long-term
debt................................................ 326,012 348,276 269,778
-------- -------- --------
Total current liabilities...................... 648,829 671,836 577,594
-------- -------- --------
Long-term debt........................................... 48,653 48,215 52,158
Other long-term liabilities.............................. 1,091 1,271 351
-------- -------- --------
Total long-term liabilities....................... 49,744 49,486 52,509
-------- -------- --------
Total liabilities................................... 698,573 721,322 630,103
-------- -------- --------
Stockholders' equity (deficit):
Preferred stock, 2,000,000 shares authorized; no shares
issued or outstanding.................................. -- --
Common stock, $.0001 par value; 100,000,000 shares
authorized, 32,399,060, 32,357,840 and 32,677,155
shares issued respectively............................. 3 3 3
Additional paid-in capital............................... 19,114 19,003 18,735
Retained earnings (deficit).............................. (52,007) (56,707) (58,251)
Treasury stock, shares at cost........................... (2) (2) (2)
Cumulative translation adjustments....................... (37) (29) --
-------- -------- --------
Total stockholders' equity (deficit)................ (32,929) (37,732) (39,515)
-------- -------- --------
$ 665,644 $683,590 $590,588
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 39
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED YEARS ENDED
----------------------- ------------------------------------
SEPT. 28, SEPT. 29, JUNE 29, JUNE 30, JULY 2,
1997 1996 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues:
Product revenues................... $ 500,938 $ 525,962 $2,126,973 $1,940,796 $1,342,323
Service revenues................... 105,901 71,674 353,624 207,511 130,940
---------- ---------- ---------- ---------- ----------
Total net revenues......... 606,839 597,636 2,480,597 2,148,307 1,473,263
---------- ---------- ---------- ---------- ----------
Cost of revenues:
Cost of products sold.............. 450,781 482,716 1,922,826 1,764,775 1,236,940
Cost of services provided.......... 79,872 54,039 267,554 168,957 110,349
---------- ---------- ---------- ---------- ----------
Cost of revenues........... 530,653 536,755 2,190,380 1,933,732 1,347,289
---------- ---------- ---------- ---------- ----------
Product gross margin................. 50,157 43,246 204,147 176,021 105,383
Services gross margin................ 26,029 17,635 86,070 38,554 20,591
---------- ---------- ---------- ---------- ----------
Total gross margin......... 76,186 60,881 290,217 214,575 125,974
Selling, general and administrative
expenses........................... 61,815 58,547 251,963 192,312 132,586
Nonrecurring stock compensation
costs.............................. -- -- -- 18,185 --
---------- ---------- ---------- ---------- ----------
Income (loss) from
operations............... 14,371 2,334 38,254 4,078 (6,612)
Interest expense, net................ 9,669 8,132 37,147 29,726 23,151
Other income......................... -- -- 462 -- --
Income (loss) before income
taxes.................... 4,702 (5,798) 1,569 (25,648) (29,763)
Provision (benefit) for income
taxes.............................. 2 10 25 28 (509)
---------- ---------- ---------- ---------- ----------
Net income (loss).......... $ 4,700 $ (5,808) $ 1,544 $ (25,676) $ (29,254)
========== ========== ========== ========== ==========
Net income (loss) per share.......... $ .14 $ (.18) $ .04 $ (.82) $ (.93)
========== ========== ========== ========== ==========
Weighted average number of shares
outstanding and dilutive common
stock equivalents.................. 33,736,205 32,357,840 35,296,435 31,438,340 31,333,300
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 40
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNAUDITED THREE
MONTHS ENDED
------------------- YEARS ENDED
SEPT. SEPT. ------------------------------
28, 29, JUNE 29, JUNE 30, JULY 2,
1997 1996 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................... $ 4,700 $ (5,808) $ 1,544 $(25,676) $(29,254)
Adjustments to reconcile net income (loss)
to net cash used in operating
activities:
Stock compensation costs............... 111 -- -- 16,185 --
Depreciation and amortization.......... 4,487 2,869 14,146 10,628 5,911
Amortization of goodwill............... 840 1,311 4,239 3,012 847
Provision for doubtful trade and vendor
receivables.......................... -- 496 2,393 2,245 233
Accretion on long-term debentures and
notes................................ 561 516 2,032 1,996 1,609
Gain on sale of assets................. -- -- (504) -- --
Other.................................. 72 (1,213) 20 404 (508)
Changes in working capital, net of effects
of acquisitions:
Trade receivables...................... 6,473 (11,834) (31,168) (66,645) (41,026)
Inventories............................ (451) (34,469) (8,161) (24,141) (11,437)
Vendor receivables..................... 4,308 5,206 (18,219) (11,463) (931)
Other current assets................... 926 1,596 (396) 1,710 (2,636)
Accounts payable and accrued
liabilities.......................... (743) 26,255 8,635 17,371 67,696
Other long-term liabilities............ (186) (46) (661) (296) (565)
-------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities................. 21,098 (15,121) (26,100) (74,670) (10,061)
-------- -------- -------- -------- --------
Cash flows from investing activities:
Sale of assets, net of expenses........... -- -- 2,285 8,483 --
Capital expenditures...................... (4,219) (6,644) (21,737) (19,205) (7,178)
Cash paid for acquisitions................ -- (5,546) (7,216) (21,970) (1,615)
Other..................................... -- (1,179) (1,181) (395) (161)
-------- -------- -------- -------- --------
Net cash provided by (used in)
investing activities................. (4,219) (13,369) (27,849) (33,087) (8,954)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of notes payable... 30,185 36,087 87,090 112,050 16,784
Change in cash overdraft.................. 6,107 (3,636) (13,687) 11,176 5,347
Proceeds from long-term debt.............. -- -- -- 28,103 --
Issue of common stock warrants............ -- -- -- 897 571
Proceeds from sale of common stock, net... -- 121 268 385 --
Payments on debt.......................... (58,679) (451) (16,487) (44,332) (2,798)
-------- -------- -------- -------- --------
Net cash provided from (used in)
financing activities................. (22,387) 32,121 57,184 108,279 19,904
-------- -------- -------- -------- --------
Increase (decrease) in cash................. (5,508) 3,631 3,235 522 889
Cash at beginning of period................. 15,838 12,603 12,603 12,081 11,192
-------- -------- -------- -------- --------
Cash at end of period....................... $ 10,330 $ 16,234 $ 15,838 $ 12,603 $ 12,081
======== ======== ======== ======== ========
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest paid............................. $ 10,383 $ 8,427 $ 36,458 $ 28,081 $ 22,085
======== ======== ======== ======== ========
Taxes paid/(refund)....................... $ (657) $ (1,276) $(12,087) $ 11,701 $ 4,446
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 41
ENTEX INFORMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED CUMULATIVE
--------------- PAID IN DEFERRED EARNINGS TREASURY TRANSLATION
SHARES AMOUNT CAPITAL COMPENSATION (DEFICIT) STOCK ADJUSTMENTS TOTAL
------ ------ ---------- ------------ --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 3, 1994............... 31,335 $ 3 $ 695 $ -- $ (3,321) $ (1) $ -- $ (2,624)
Purchase of treasury stock.......... -- -- -- -- -- (28) -- (28)
Issuance of treasury stock.......... -- -- -- -- -- 24 -- 24
Repurchase of common stock
warrants.......................... -- -- (44) -- -- -- -- (44)
Issuance of common stock warrants... -- -- 621 -- -- -- -- 621
Net (loss).......................... -- -- -- -- (29,254) -- -- (29,254)
------ --- ------- ------- ------- ---- ---- -------
Balance, July 2, 1995............... 31,335 3 1,272 -- (32,575) (5) -- (31,305)
Purchase of treasury stock.......... -- -- -- -- -- (7) -- (7)
Issuance of common stock under stock
purchase arrangements............. 80 -- 381 -- -- 10 -- 391
Issuance of common stock warrants... -- -- 897 -- -- -- -- 897
Issuance of common stock............ 1,262 -- 4,484 -- -- -- -- 4,484
Deferred compensation............... -- -- 11,701 (11,701) -- -- -- --
Amortization of deferred
compensation...................... -- -- -- 11,701 -- -- -- 11,701
Net (loss).......................... -- -- -- -- (25,676) -- -- (25,676)
------ --- ------- ------- ------- ---- ---- -------
Balance, June 30, 1996.............. 32,677 3 18,735 -- (58,251) (2) -- (39,515)
Return of treasury stock............ (429) -- -- -- -- -- -- --
Issuance of common stock............ 110 -- 268 -- -- -- -- 268
Foreign currency change............. -- -- -- -- -- -- (29) (29)
Net income.......................... -- -- -- -- 1,544 1,544
------ --- ------- ------- ------- ---- ---- -------
Balance, June 29, 1997.............. 32,358 $ 3 $ 19,003 $ -- $ (56,707) $ (2) $ (29) $(37,732)
====== === ======= ======= ======= ==== ==== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 42
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Description of the Business
ENTEX Information Services, Inc. ("ENTEX" or the "Company") was formed for
the purpose of acquiring, on August 6, 1993, the net assets of the personal
computer and systems integration business of JWP Information Services, Inc. On
June 28, 1996, the Company's former parent, ENTEX Holdings, Inc., ("Holdings")
was merged with and into the Company. Holdings' investment in the Company
represented its only substantive assets and operations, and accordingly, was
accounted for like a pooling-of-interests transaction.
ENTEX is a leading provider of personal computer ("PC") solutions to meet
the distributed information technology systems and end user support requirements
of Fortune 1000 companies and other large enterprises. The Company's total PC
management capabilities include acquisition services, network integration, and
advanced support for the PC-based networked environment. Typical services
provided include: hardware and software acquisition and integration; network
design, integration and migration; selective outsourcing; end user support and a
variety of other professional services.
(B) Fiscal Year
The Company maintains its accounting records on a fifty-two week basis
ending on the Sunday closest to June 30. The accompanying financial statements
present the results of operations for the fiscal years July 1, 1996 to June 29,
1997, July 3, 1995 to June 30,1996 and July 3, 1994 to July 2, 1995.
(C) Consolidation
The consolidated financial statements include the financial statements of
the Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
(D) Inventories
Inventory for resale is stated at the lower of cost or market value. Cost
for finished goods is lowered when vendors announce price reductions. Spare
parts inventory is valued using a moving weighted average market value method
which approximates lower of cost or market. The Company assesses the
appropriateness of the inventory valuations giving consideration to obsolete,
slow moving or non-saleable inventory.
(E) Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation expense is calculated on the straight-line method
over the estimated useful lives of the assets. Such useful lives range from 25
years for buildings and three to seven Leasehold and capital improvements are
amortized straight-line over the estimated useful life of the property or over
the term of the lease, whichever is shorter. Capitalized software is amortized
using a straight-line basis over a period of five years.
The Company systematically reviews the recoverability of its long-lived
assets by comparing their unamortized carrying value to their related
undiscounted future cash flows. Any impairment is charged to expense when such
determination is made.
F-6
<PAGE> 43
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(F) Goodwill
Goodwill relates to the excess of cost over the net assets of acquired
businesses and is being amortized on a straight-line basis from ten to 20 years.
The Company reviews the recoverability of goodwill by comparing the
unamortized balance to the related anticipated undiscounted future cash flows
and measures any impairment based on the excess of the unamortized balance over
the present value of future cash flows, discounted using the Company's average
cost of funds.
(G) Revenue Recognition
Product revenue is recognized at the time of shipment to the customer.
Service revenue is recognized at the time the service is rendered or ratably
based on time elapsed or hours incurred if performed over a service contract
period. Unrecognized service revenue is deferred and included with accrued
liabilities.
(H) Vendor Programs
The Company receives volume incentives and rebates from certain
manufacturers related to sales of certain products which are recorded as a
reduction of cost of sales when related products are sold. Other incentives may
require specific incremental action on the part of the Company such as training,
advertising or other pre-approved market development activities and are
recognized as an offset to the related costs when the required action is
performed.
(I) Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method of SFAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in the tax rates is recognized
in income in the period that includes the enactment date.
(J) Financial Instruments
The Company's financial instruments, principally cash, accounts receivable
and accounts payable are carried at cost, which approximates fair value due to
the short-term maturity of these instruments. As amounts outstanding under the
Company's credit agreements bear interest approximating current market rates,
their carrying amounts approximate fair value.
(K) Stock-Based Compensation
The Company accounts for its stock option plans in accordance with
Accounting Principles Board Opinion No. 25, "Accounting For Stock Issued To
Employees". Accordingly, no compensation expense has been recognized in 1997
because the options had an exercise price equal to or greater than the market
value of the Common Stock on the date of the grant.
(L) New Accounting Pronouncements
The Financial Accounting Standards Board recently issued standards which
will be applicable to the Company but which the Company has not yet adopted:
FASB Statement No. 130, Reporting Comprehensive
F-7
<PAGE> 44
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Income and FASB Statement No. 131, Disclosures About Segments of an Enterprise
and Related Information. These statements are not expected to have a significant
impact on the financial statements.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted for both interim
and annual financial statements for periods ending after December 15, 1997. At
that time, the Company will be required to change the method currently used to
compute earnings per share and to restate all prior periods. Under the new
requirements for calculating earnings per share, the common stock equivalents
are not considered in the calculation of basic earnings per share. Basic
earnings per share under FAS No. 128 will not be significantly different from
amounts presented herein.
(M) Earnings Per Share
Primary and fully diluted earnings per share are computed using the
weighted average number of shares of Common Stock and dilutive common stock
equivalents outstanding during the period. Common stock equivalents are computed
using the treasury stock method. Common stock equivalents include amounts
computed on options and warrants issued during the periods presented.
(N) Interim Financial Statements
In the opinion of management, the information furnished in the unaudited
interim consolidated financial statements reflects all adjustments necessary for
a fair statement of the results of operations as of and for the three months
ended September 28, 1997 and September 29, 1996. The unaudited interim
consolidated financial statements have been prepared in accordance with the
instructions to Form 10-Q and therefore do not include some information and
notes necessary to conform with the annual reporting requirements.
(2) ACQUISITIONS AND DIVESTITURES
On January 12, 1995, the Company acquired all the issued and outstanding
stock of CompuEase, Inc., d/b/a The L.E.A.D. Group for $2,400. The L.E.A.D.
Group was a private, value-added computer reseller and provider of network
services in Bloomfield, Michigan. The purchase price was comprised of $1,400 in
cash and non-interest bearing promissory notes totaling $1,000. The acquisition
has been accounted for as a purchase, and the results of The L.E.A.D. Group have
been included in the accompanying consolidated financial statements since the
date of acquisition. The excess of the aggregate purchase price over the fair
value of net assets acquired was $1,595.
On September 19, 1995 the Company purchased all of the outstanding shares
of Random Access, Inc. ("Random Access") for $21,970. Random Access was a
provider of information technology solutions through the sale of microcomputers
and technical services to corporate and institutional clients in the western
United States. The Company issued a $20,000 four year interest-bearing note
payable to IBM Credit Corporation to fund this purchase. The acquisition has
been accounted for as a purchase, and the results of operations of Random Access
have been included in the accompanying financial statements since the date of
acquisition. The excess of the aggregate purchase price over the fair value of
the net assets acquired was $28,317.
On April 2, 1996, the Company sold the training business that was acquired
as part of the Random Access acquisition to Knowledge Alliance Holdings, Inc.
("KAH"), a wholly owned subsidiary of Training Holdings LLC. Training Holdings
LLC is a corporation controlled by Dort A. Cameron III, the Company's chairman
and majority stockholder, and his affiliates. The training business assets had a
net book value of approximately $1,100 and were exchanged for 2,500 shares of
KAH common stock, which represented 25% of its outstanding shares. There was no
gain or loss recognized on the sale and the Company's $1,100 investment in KAH
is included in other assets. In connection with this sale, KAH was granted the
option to purchase the assets of the training business conducted by ENTEX in
Minneapolis, MN for the book value of the assets on
F-8
<PAGE> 45
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
the date of acquisition. The option was exercised on August 1, 1996 and the
purchase price was $235. The Company's share of earnings (loss) in KAH since
April 2, 1996 is insignificant.
On July 12, 1996, the Company acquired all the issued and outstanding stock
of FCP Technologies Inc. ("FCP") for $7,216, including direct acquisition costs.
FCP was a systems integrator based in Frederick, Maryland specializing in
network integration, migration and consulting services. The acquisition has been
accounted for as a purchase, and the results of operations of FCP have been
included in the accompanying financial statements since the date of acquisition.
The excess of the aggregate purchase price over the fair market value of the net
assets acquired was $14,077. The difference between the pro forma results of
operations under the assumption that the FCP acquisition occurred as of July 1,
1996 and actual reported results is immaterial. Pro forma consolidated revenue,
net (loss) and net loss per share for the year ended June 30, 1996 under the
assumption that the FCP acquisition occurred as of July 3, 1995 are $2,218,307,
($26,276) and $(.84), respectively.
On April 18, 1997, the Company sold Education Access, acquired as part of
the acquisition of Random Access, for $2,285. The net gain on the sale was $504.
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
UNAUDITED
SEPTEMBER 28, JUNE 29, JUNE 30,
1997 1997 1996
------------- -------- --------
<S> <C> <C> <C>
Finished goods held for resale... $ 175,428 $175,300 $164,805
Spare parts...................... 8,980 8,657 6,648
-------- -------- --------
$ 184,408 $183,957 $171,453
======== ======== ========
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 29, JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
Land................................................... $ 1,305 $ 1,155
Building and building improvements..................... 8,437 5,963
Office and computer equipment.......................... 47,061 29,227
Furniture and fixtures................................. 11,471 9,547
Leasehold improvements................................. 7,083 6,293
Capitalized software................................... 7,590 5,773
Other equipment........................................ 6,363 7,048
-------- --------
89,310 65,006
-------- --------
Accumulated depreciation and amortization.............. (34,261) (20,194)
-------- --------
$ 55,049 $ 44,812
======== ========
</TABLE>
F-9
<PAGE> 46
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(5) DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
JUNE 29, JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
Floor Plan Financing........................... $338,005 $263,025
Short-Term Debt................................ 10,271 6,753
-------- --------
348,276 269,778
Long-Term Debt................................. 48,215 52,158
-------- --------
Total................................ $396,491 $321,936
======== ========
</TABLE>
(A) FLOOR PLAN FINANCING
The Company has floor plan financing agreements with IBM Credit Corporation
and Finova Capital Corporation which made credit available of up to
$635,000 at June 29, 1997 and $645,000 at June 30, 1996. These agreements
provide that a portion of the balance outstanding be non-interest bearing
for a specific period of time ranging from 30 to 60 days. Interest rates
under the agreements are prime plus 1/2% (base rate) and prime plus 1/4%
(base rate) at June 29, 1997 and June 30, 1996, respectively, except for
$62,500 which bears interest at prime plus 2%. The agreements are generally
secured by inventories, equipment, and in certain instances, accounts
receivable. The aggregate amounts outstanding under these agreements as of
June 29, 1997 and June 30, 1996 were $421,075 and $454,564, respectively.
Of these amounts, $338,005 and $263,025, respectively, represent interest
bearing liabilities and $83,070 and $191,539, respectively, are
non-interest bearing and are included within accounts payable. Under the
financing agreement with IBM Credit Corporation, a term loan in the
original principal amount of $20 million is required to be outstanding
unless there are no outstanding interest bearing advances under such
financing agreement. The agreements may be terminated by the financiers
immediately; upon certain events of default; or otherwise within sixty
days by either party with notice. Under these agreements the Company had
available an additional $213,925 and $190,436, at June 29,1997 and
June 30, 1996, respectively.
The above floor plan agreements contain restrictive covenants with respect
to maintenance of minimum tangible net worth, current ratio, fixed asset
additions, fixed charges, and certain additional indebtedness. In addition,
the IBM Credit Corporation agreement prohibits the Company from paying cash
dividends on common stock. As of June 30, 1996, the Company was not in
compliance with all such covenants and, as a result of certain excess
borrowings, was in a collateral shortfall position with respect to the
contractual levels of collateral. Under the IBM Credit Agreement at June
29, 1997, the Company was not in compliance with all such covenants but
continued to maintain an excess collateral position. As of July 15, 1997,
the Company amended its financing agreement with IBM Credit Corporation.
IBM Credit Corporation has waived all defaults arising from such
non-compliance with covenants.
(B) SHORT-TERM DEBT
Short-term debt includes current installments of long-term debt totaling
$984 at June 29, 1997 and $6,753 at June 30, 1996. Remaining amounts at
June 30, 1997 are notes payable carrying an effective interest rate of 4%
to 7%.
F-10
<PAGE> 47
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(C) LONG-TERM DEBT
Long-term debt consists primarily of (a) subordinated debentures discounted
to yield 20% that will accrete to their face value of $43,128 by their due
date of March 1, 2007 ($22,654 and $23,081 outstanding at June 29, 1997 and
June 30, 1996, respectively), (b) $17,250 note (outstanding at June 29,
1997 and June 30, 1996, respectively) issued in connection with the
purchase of Random Access which bears interest at prime plus 2.5% and is
due on September 19, 1999, (c) a mortgage loan of $5,149 relating to the
integration center in Erlanger, Kentucky which bears interest at 8.75% and
is due February 2007, of which $5,149 and $5,475 was outstanding at June
29, 1997 and June 30, 1996, respectively, (d) $4,146 (outstanding at June
29, 1997 and June 30, 1996, respectively) in notes held by entities owned
or controlled by the Company's Chairman that bear interest at prime plus
2.5% and are due on July 29, 2000, (e) $9,000 face amount six year interest
bearing note ($0 and $8,103 outstanding at June 29, 1997 and June 30, 1996,
respectively), due June 2002 bearing interest at 4.0% for the first two
years, and at 6.0% for the final four years, (f) $372 note related to the
management buyout ($0 and $372 outstanding at June 29, 1997 and June 30,
1996, respectively) and (g) $484 note related to an acquisition ($0 and
$484 outstanding at June 29, 1997 and June 30, 1996, respectively).
Aggregate annual principal payments of long-term debt subsequent to June
29, 1997 (including the subordinated debentures at face value) are as follows:
<TABLE>
<S> <C>
1998.............................................. $ 984
1999.............................................. 4,138
2000.............................................. 4,173
2001.............................................. 8,358
2002.............................................. 4,254
Thereafter........................................ 47,766
--------
69,673
Less unaccreted interest.......................... (20,474)
--------
$ 49,199
========
</TABLE>
(6) INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
---------------------------------
JUNE 29, JUNE 30, JULY 2,
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Current:
Federal........................................ $ $ $ (449)
State.......................................... -- -- (68)
Foreign........................................ 25 28 8
Deferred:
Federal........................................ -- -- --
State............................................ -- -- --
--- --- -----
Total.................................. $ 25 $ 28 $ 509
=== === =====
</TABLE>
Through June 30, 1996, the Company had generated net operating losses for
both book and tax purposes. For the current year the provision for income taxes
was offset by the utilization of a net operating loss carryforward. Realization
of the remaining deferred tax asset associated with the net operating loss
carryforward is dependent on the likelihood of generating sufficient taxable
income prior to its expiration. Accordingly, the amount of the valuation
allowance equals the excess of the deferred tax assets over deferred tax
liabilities.
F-11
<PAGE> 48
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
A reconciliation of the differences between income taxes computed at
Federal statutory rates (34%) and the provision for income taxes is as follows:
<TABLE>
<CAPTION>
JUNE JUNE
29, 30, JULY 2,
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Tax at statutory rate........................ $ 533 $(8,720) $(10,119)
Non-deductible goodwill...................... 1,051 782 27
Non-deductible meals and entertainment
expenses................................... 437 263 79
State and local income carryback............. -- (589) (1,552)
Provision/(benefit) for valuation
allowances................................. (1,982) 4,335 11,161
Nondeductible stock compensation expense..... -- 3,978 --
Other........................................ (14) (21) (105)
------- ------- --------
Provision for income taxes................... $ 25 $ 28 $ (509)
======= ======= ========
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for tax and financial
reporting purposes. Significant components of the Company's deferred tax assets
and deferred tax liabilities at June 29, 1997 and June 30, 1996 are as follows:
<TABLE>
<CAPTION>
JUNE 29, JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward.............. $ 19,425 $ 21,629
Accruals and reserves not currently
deductible................................ 3,768 4,888
Allowance for bad debts...................... 1,576 1,303
Inventory valuation reserves................. 2,157 1,227
Other........................................ 1,873 1,824
Valuation allowance.......................... (17,015) (18,463)
-------- --------
Total................................ $ 11,784 $ 12,408
======== ========
Deferred tax liabilities:
Discount in subordinated debentures.......... $ 7,106 $ 7,859
Other........................................ 4,678 4,549
-------- --------
Total................................ $ 11,784 $ 12,408
======== ========
</TABLE>
Net current and non-current assets/liabilities are insignificant.
At June 29, 1997, the Company had a net operating loss carryforward of
approximately $50,000, which will expire in 2009 through 2011. Of such amounts,
approximately $11,500 relates to purchased net tax benefits which when realized
will decrease goodwill by approximately $4,500.
(7) STOCK OPTIONS, STOCK BENEFIT PLANS AND WARRANTS
The Company has three stock options plans: the ENTEX Holdings 1996 Stock
Option Plan (the "Holdings Plan") adopted February 1996, EIS Stock Option Plan
(the "EIS Plan") adopted July 1996, and the Performance Incentive Plan (the
"PIP") adopted August 1996 (collectively, the "Plans"). The Holdings Plan and
the EIS Plan provide for the issuance of incentive stock options ("ISOs") and
stock options that are non-qualified for Federal income tax purposes ("NQSOs").
The PIP provides for the issuance of ISOs, NQSOs, stock appreciation rights,
restricted stock, deferred stock, dividend equivalents and other stock-related
awards. The exercise price of the ISOs under all Plans may not be less than 100%
of fair market value
F-12
<PAGE> 49
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
at the time of grant. Options granted under the Holdings Plan and the EIS Plan
have an expiration of five years and generally vest over three years. Options
granted under the PIP have an expiration of ten years and generally vest over
five years. The Holdings Plan and EIS Plan were terminated in June 1996 and
August 1996, respectively, and therefore no further grants can be awarded from
such plans. At June 29, 1997 there were 9,045,000 shares reserved for issuance
under the PIP, and 5,120,805 options outstanding under all Plans.
The Company has a Non-Employee Director Stock Plan, adopted August 1996,
which provides for the crediting of stock units representing the right to
receive common stock at not less than 100% of the fair market value at the time
of the credit. At June 29, 1997, 100,000 shares have been reserved for issuance,
of which no shares have been issued.
In fiscal year 1996, certain managers and employees owned common stock of
the Company pursuant to Securities Purchase and Stockholders' Agreements
("Management Shares"), and share units pursuant to the 1993 Employee Share Unit
Plan ("SharePlan Shares"). Effective June 28, 1996, as a result of an amendment
to such plans ownership was vested in the management shares, common stock was
issued for shares units, and the Company recorded compensation expense of
$11,701 relating to the Management Shares and $4,484 relating to the SharePlan
Shares. In addition, the Company assumed the obligation for the tax withholding
requirement for the SharePlan Shares of $2,000, which was recorded as
compensation expense. No compensation expense was recognized in connection with
the Management Shares or SharePlan Shares for the year ended June 29, 1997.
At June 30, 1996 and June 29, 1997 there were 708,350 shares of common
stock reserved for outstanding warrants held by lenders. Warrants to purchase
333,350 shares of common stock were granted on November 15, 1994, are
exercisable for $.20 in total and expire on July 15, 2001. These warrants were
issued in connection with a settlement of a dispute between the Company and the
vendor. Warrants to purchase 375,000 shares of common stock were granted on June
21, 1996, are exercisable for $14.40 per share and expire on June 21, 2003.
These warrants were issued as consideration for less than market rate debt.
A summary of the Company's stock option activity, and related information
for the fiscal years ended June 29, 1997 and June 30, 1996 is as follows (in
thousands, except for the weighted average exercise prices):
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
----- -------------- ----- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year........................ 3,260 $ 5.03 -- --
Granted............................................... 2,325 $ 5.34 3,565 $ 5.03
Exercised............................................. -- -- -- --
Canceled.............................................. (465) $ 4.46 (305) $ 4.63
Outstanding -- end of year.............................. 5,120 $ 5.19 3,260 $ 5.03
Exercisable -- end of year.............................. 365 $ 2.38 10 $ 9.02
</TABLE>
The following summarizes information about the Company's stock options
outstanding and exercisable by price range at June 29, 1997 (options in
thousands):
<TABLE>
<CAPTION>
WT. AVERAGE
REMAINING
RANGE OF NUMBER CONTRACTUAL WEIGHTED-AVERAGE NUMBER
EXERCISE PRICES OUTSTANDING LIFE YEARS EXERCISE PRICE EXERCISABLE
- ------------------ ----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
$.01-$4.00........ 1,285 9.9 $ 2.04 295
$4.00-$8.00....... 2,690 4.8 $ 4.63 60
$8.00-$12.00...... 1,145 3.7 $ 9.53 10
</TABLE>
F-13
<PAGE> 50
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Pro forma information regarding net income is required by SFAS No. 123
"Accounting for Stock Based Compensation", and has been determined as if the
Company had accounted for its stock option plan under the fair value method of
that statement. Pro forma net income (loss) and compensation expense are as
follows:
<TABLE>
<CAPTION>
JUNE 29, JUNE 30,
1997 1996
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss)...................................... As reported $1,544 $(25,676)
Pro forma $ 721 $(26,373)
Compensation Expense................................... Pro forma $ 823 $ 697
Primary Earnings Per Share............................. As reported $ .04 $ (.82)
Pro forma $ .02 $ (.84)
</TABLE>
For purposes of pro forma disclosures only, the estimated fair value of the
options is amortized to expense over the options' vesting period. The fair value
for all options was estimated at the date of grant using the Black-Scholes
multiple option model with the following assumptions: Risk-free interest rates
of 6.22% to 6.39%, for fiscal year 1997 and 6.39% to 6.69% for fiscal year 1996;
expected dividend yield of 0.0%; and expected life of 3.7 to 9.9 years. The per
share weighted-average fair value of options granted was $1.40 during fiscal
year 1997 and $1.06 during fiscal 1996. Volatility was not a factor in
calculating the fairness of options since the Company is not a public company as
defined in SFAS, No. 123.
(8) 401(K) PLAN
The Company has a 401(k) Plan that covers all employees effective the first
day of the month following 30 days of employment and who are at least 21 years
of age. Employees may contribute between 1% and 15% of compensation subject to
the limitations imposed by law. The Company will match up to 3% of the
employee's eligible contribution. The amount charged to expense for the matching
contribution was $1,655 for the year ended June 29, 1997. There was no matching
contribution for the years ended June 30, 1996 and July 2, 1995.
(9) LEASES
The Company routinely leases office buildings, equipment and automobiles.
These leases expire at various dates through July 2005. Certain leases contain
renewal provisions and generally require the Company to pay utilities,
insurance, taxes, and other operating expenses. Future minimum rental payments
under operating leases that have initial or remaining non-cancelable lease terms
in excess of one year as of July 29, 1997 as are follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE:
<S> <C>
1998............................................ $ 8,456
1999............................................ 7,762
2000............................................ 6,361
2001............................................ 4,973
2002............................................ 3,269
Thereafter...................................... 6,368
-------
Total minimum lease payments....................... $37,189
=======
</TABLE>
Rent expense for all operating leases totaled $11,908, $9,412 and $5,060
for the years ended June 29, 1997, June 30, 1996, and July 2, 1995,
respectively.
F-14
<PAGE> 51
ENTEX INFORMATION SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
The cost of assets recorded under capital leases was $1,870 at June 29,
1997 and $1,502 at June 30, 1996 and July 2, 1995. Accumulated amortization on
such assets was $638, $343, and $109 at June 29, 1997, June 30, 1996, and July
2, 1995, respectively. The present value of capital leases as of June 29, 1997,
June 30, 1996 and July 2, 1995 was $579, $767, and $1,199, respectively.
(10) COMMON STOCK SPLIT
On November 25, 1997 the Board of Directors approved an increase in the
number of authorized common stock shares from 10,000,000 to 100,000,000. In
addition, the Board of Directors authorized a stock split in the form of a
four-for-one stock dividend to holders of record as of November 25, 1997,
whereby each such share will be equal to five shares of Common Stock. All
references in the consolidated financial statements referring to shares, share
prices, per share amounts and stock plans have been adjusted retroactively for
the four-for-one stock dividend.
F-15
<PAGE> 52
ENTEX INFORMATION SERVICES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE
AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
--------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Description
Allowance for doubtful accounts
1997......................... $ 4,101 $ 474 $ -- $ 171(1) $ 4,746
1996......................... 2,455 2,101 -- (455)(1) 4,101
1995......................... 2,849 232 -- (626)(1) 2,455
Vendor receivable reserve
1997......................... -- 2,000 -- -- 2,000
1996......................... -- -- -- -- --
1995......................... -- -- -- -- --
</TABLE>
- ---------------
(1) Uncollectible accounts written off, net of recoveries
II-1
<PAGE> 53
ENTEX INFORMATION SERVICES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER PAGE NUMBER
--------- -----------
<S> <C> <C>
2.1(a) Agreement and Plan of Reorganization by and between ENTEX
Holdings, Inc. and the Company dated as of June 28, 1996.........
2.2 Agreement and Plan of Merger by and among the Company, ENTEX
Acquisition Corp. and Random Access, Inc. and related
amendment........................................................
2.3 Agreement and Plan of Reorganization among the Company, EIS
Acquisition Corporation and FCP Technologies, Inc................
3.1(a) Certificate of Incorporation of the Company, as amended..........
3.2(a) Bylaws of the Company............................................
4.1(a) Form of the Company's Common Stock Certificate...................
10.1(a) Form of Indemnification Agreement entered into by the Company
with each of its directors and executive officers................
10.2(a) Agreement between John A. McKenna, Jr. and the Company dated
August 7, 1994 and related amendment.............................
10.3(a) Letter Agreement between Kenneth A. Ghazey and the Company dated
January 6, 1997..................................................
10.4(a) Retention Agreement between Dale H. Allardyce and the Company
dated November 17, 1997..........................................
10.5(a) Letter Agreement between David J. Csira and the Company dated
November 15, 1996................................................
10.6(a) Employment Agreement between Richard Nathanson and the Company
dated July 10, 1996..............................................
10.7(a) Stockholders' Agreement among Entex Holdings, Inc., Dort A. Cam-
eron III and Entex Associates, L.P. dated December 10, 1993 and
related amendment................................................
10.8(b) ENTEX Holdings, Inc. 1996 Stock Option Plan and related
agreements.......................................................
10.9(b) ENTEX Information Services, Inc. 1996 Stock Option Plan and
related agreements...............................................
10.10(b) 1996 Performance Incentive Plan and related agreements...........
10.11(a) 1996 Non-Employee Director Stock Plan............................
10.12(a) ENTEX Management Incentive Plan..................................
10.13 Sublease Agreement dated June 6, 1997 between General Electric
Company and the Company and related consent......................
10.14 Lease Agreement dated January 20, 1995 between Royal Executive
Park II and the Company and related amendment....................
10.15 Sublease Agreement dated August 6, 1993 between JWP Inc., and the
Company and related amendments consents and lease agreements.....
10.16 Lease Agreement dated December 31, 1996 between the Company and
Duke Realty Limited Partnership and related amendments...........
10.17 Lease Agreement dated May 15, 1995 between the Company and Duke
Realty Limited Partnership and related amendments................
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER PAGE NUMBER
--------- -----------
<S> <C> <C>
10.18 Lease Agreement dated February 29, 1992 between the Company and
725 C.W. Associates Limited Partnership and related
amendments.......................................................
10.19 Dealer Loan and Security Agreement between FINOVA Capital
Corporation and the Company dated April 21, 1995 and Letter
Agreements dated April 17, 1995 and May 17, 1996.................
10.20 Fourth Amended and Restated Agreement for Wholesale Financing by
and between IBM Credit Corporation and the Company and related
amendments.......................................................
10.21(a) Warrant Agreement between IBM Credit Corporation, Entex Holdings,
Inc. and the Company dated November 15, 1994.....................
10.22(a) Warrant Agreement between IBM Credit Corporation and the Company
dated July 15, 1997..............................................
11.1(a) Statement of computation of earnings per share...................
21.1(a) Subsidiaries of the Company......................................
27.1(a) Financial Data Schedule..........................................
</TABLE>
- ---------------
(a) Previously filed.
(b) Portion filed herewith and portion previously filed.
<PAGE> 1
Exhibit 10.8
ENTEX HOLDINGS, INC.
1996 STOCK OPTION PLAN
---------------
AS AMENDED AND RESTATED JUNE 21, 1996
<PAGE> 2
ENTEX HOLDINGS, INC.
1996 STOCK OPTION PLAN
INTRODUCTION
ENTEX Holdings, Inc., a Delaware corporation (hereinafter
referred to as the "Corporation"), hereby establishes an incentive compensation
plan to be known as the "ENTEX 1996 Stock Option Plan" (hereinafter referred to
as the "Plan"), as set forth in this document. The Plan permits the grant of
Non-Qualified Stock Options and Incentive Stock Options.
The Plan shall become effective on February 1, 1996. However, it
shall be rendered null and void and have no effect, and all Plan Awards granted
hereunder shall be canceled, if the Plan is not approved by the affirmative vote
of the holders of a majority of the Corporation's issued and outstanding Common
Stock within twelve (12) months of such date.
The purpose of the Plan is to promote the success and enhance the
value of the Corporation by linking the personal interests of Participants to
those of the Corporation's stockholders, customers and employees, by providing
Participants with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Corporation in its ability to motivate,
and retain the services of, Participants upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
<PAGE> 3
DEFINITIONS
For purposes of this Plan, the following terms shall be defined
as follows unless the context clearly indicates otherwise:
A. "Affiliate" shall have the meaning ascribed to it in Rule
12b-2 under the Exchange Act.
B. "Associate" shall have the meaning ascribed to it in Rule
12b-2 under the Exchange Act.
C. "Cameron" shall mean Dort A. Cameron III.
D. "Cameron Affiliates" shall mean persons or entities that are
Affiliates of Cameron.
E. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations thereunder.
F. "Committee" shall mean the Stock Option Committee of the Board
of Directors of the Corporation.
G. "Common Stock" shall mean the common stock, par value $0.001
per share, of the Corporation.
H. "Corporation" shall mean ENTEX Holdings, Inc., a Delaware
corporation, and each successor corporation thereto which continues the Plan.
I. "Disability" shall have the same meaning as the term
"permanent and total disability" under Section 22(e)(3) of the Code.
J. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.
K. "Fair Market Value" of the Corporation's Common Stock shall
mean the fair market value of the Common Stock determined by the Committee from
time to time in good faith, it being understood that such fair market value
shall be determined periodically, and shall not be required to be determined
with reference to any particular Options or any particular Participant. If the
Corporation's common stock is publicly traded, then the Fair Market Value of the
Corporation's Common Stock on a Trading Day shall mean the last reported sale
price for Common Stock or, in case no such reported sale takes place on such
Trading Day, the average of the closing bid and asked prices for the Common
Stock for such Trading Day, in either case on the principal securities exchange
on which the Common Stock is listed or admitted to trading, or if the Common
Stock is not listed or admitted to trading on any securities exchange, but is
traded in the over-the-counter market,
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the closing sale price of the Common Stock or, if no sale is publicly reported,
the average of the closing bid and asked quotations for the Common Stock, as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any comparable system or, if the Common Stock is not listed
on NASDAQ or a comparable system, the closing sale price of the Common Stock or,
if no sale is publicly reported, the average of the closing bid and asked
prices, as furnished by two members of the National Association of Securities
Dealers, Inc. who make a market in the Common Stock selected from time to time
by the Corporation for that purpose. In addition, for purposes of this
definition, a "Trading Day" shall mean, if the Common Stock is listed on any
securities exchange, a business day during which such exchange was open for
trading and at least one trade of Common Stock was effected on such exchange on
such business day, or, if the Common Stock is not listed on any national
securities exchange but is traded in the over-the-counter market, a business day
during which the over-the-counter market was open for trading and at least one
"eligible dealer" quoted both a bid and asked price for the Common Stock. An
"eligible dealer" for any day shall include any broker-dealer who quoted both a
bid and asked price for such day, but shall not include any broker-dealer who
quoted only a bid or only an asked price for such day.
L. "Good Cause" shall mean (i) the willful failure by such
Participant to perform his duties as an employee, director, consultant or other
service provider of the Corporation (other than a failure resulting from
physical or mental disability), it being understood that no act, or failure to
act, by a Participant shall be considered "willful" unless the Board of
Directors of the Corporation in the reasonable exercise of its business judgment
determines that such act or failure to act was committed without good faith and
without a reasonable belief that such act or failure to act was in the best
interests of the Company, (ii) such participant engaging in gross misconduct
injurious to the Corporation, (iii) the material breach by such Participant of
any Employment Agreement or other service agreement between the Corporation or
any Affiliate of the Corporation and such Participant or (iv) the conviction or
admission of guilt in a court of law of any crime that constitutes a felony in
the jurisdiction involved.
M. "Incentive Stock Option" shall mean a stock option satisfying
the requirements for tax-favored treatment under Section 422 of the Code.
N. "Initial Public Offering" shall mean the offering by the
Corporation in any jurisdiction of its securities to the general public with the
result that the Corporation shall be a Reporting Corporation.
O. "Non-Qualified Option" shall mean a stock option which does
not satisfy the requirements for tax-favored treatment under Section 422 of the
Code.
P. "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option granted pursuant to the provisions of Section V
hereof.
Q. "Optionee" shall mean a Participant who is granted an Option
under the terms of this Plan.
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<PAGE> 5
R. "Parent" shall mean a parent corporation of the Corporation
within the meaning of Section 424(e) of the Code.
S. "Participant" shall mean any employee or other individual
participating under the Plan.
T. "Public Offering" shall mean an Initial Public Offering or the
consolidation with, or merger with or into, or acquisition of a corporation or
other entity that is a Reporting Corporation.
U. "Reporting Corporation" shall mean, a corporation that is
required to register any class of equity securities under Section 12 of the
Exchange Act.
V. "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
W. "Subsidiary" shall mean a subsidiary corporation of the
Corporation within the meaning of Section 424(f) of the Code.
SECTION I
ADMINISTRATION
The Plan shall be administered by the Committee, which shall be
composed of at least two directors. Subject to the provisions of the Plan, the
Committee may establish from time to time such regulations, provisions,
proceedings and conditions of awards which, in its opinion, may be advisable in
the administration of the Plan. A majority of the Committee shall constitute a
quorum, and, subject to the provisions of Section IV of the Plan, the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee, shall be the acts of
the Committee. If the Corporation is a Reporting Corporation, this Plan is
intended to be a bifurcated plan.
SECTION II
SHARES AVAILABLE
Subject to the adjustments provided in Section VI of the Plan,
the aggregate number of shares of the Common Stock which may be granted for all
purposes under the Plan shall be Nine Hundred Thirty-One Thousand (931,000)
shares. Shares of Common Stock underlying the grant of Options shall be counted
against the limitation set forth in the immediately preceding sentence and may
be reused (e.g., in the event that an Option expires, is terminated unexercised,
or is forfeited as to any shares covered thereby). Incentive and Non-Qualified
Stock Options awarded under the Plan may be fulfilled in accordance with the
terms of the Plan with either authorized and unissued shares of the Common
Stock, issued shares of such Common Stock held in the Corporation's treasury or
shares of Common Stock acquired on the open market.
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SECTION III
ELIGIBILITY
Present and future officers and key employees (including officers
or key employees who are also directors) of the Corporation, or of any Parent or
Subsidiary, who are regularly employed on a salaried basis as common law
employees shall be eligible to participate in the Plan. In addition,
non-employee directors, consultants or other service providers of the
Corporation, or of any Parent or Subsidiary, shall be eligible to participate in
the Plan.
SECTION IV
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the direction of, the
Committee, which shall administer the Plan so as to comply at all times with the
Exchange Act, to the extent such compliance is required, and, subject to the
Code, shall otherwise have plenary authority to interpret the Plan and to make
all determinations specified in or permitted by the Plan or deemed necessary or
desirable for its administration or for the conduct of the Committee's business.
Subject to the provisions of Section X hereof, all interpretations and
determinations of the Committee may be made on an individual or group basis and
shall be final, conclusive, and binding on all interested parties. Subject to
the express provisions of the Plan, the Committee shall have authority, in its
discretion, to determine the persons to whom Options shall be granted, the times
when such Options shall be granted, the number of Options, the exercise price of
each Option, the period(s) during which such Option shall be exercisable
(whether in whole or in part), the restrictions to be applicable to Options and
the other terms and provisions thereof (which need not be identical). In
addition, the authority of the Committee shall include, without limitation, the
following:
A. Financing. The arrangement of temporary financing for an
Optionee by registered broker-dealers, under the rules and regulations of the
Federal Reserve Board, for the purpose of assisting the Optionee in the exercise
of an Option, such authority to include the payment by the Corporation of the
commissions of the broker-dealer.
B. Procedures for Exercise of Option. The establishment of
procedures for an Optionee (i) to exercise an Option by payment of cash or any
other property, including, but not limited to, Promissory Notes due 2000 of the
Corporation or other debt securities of the Corporation, at the fair value
thereof, acceptable to the Committee, (ii) to have withheld from the total
number of shares of Common Stock to be acquired upon the exercise of an Option
that number of shares having a Fair Market Value, which, together with such cash
as shall be paid in respect of fractional shares, shall equal the Option
exercise price of the total number of shares of Common Stock to be acquired,
(iii) to exercise all or a portion of an Option by delivering that number of
shares of Common Stock already owned by him having a Fair Market Value which
shall equal the Option exercise price for the portion exercised and, in cases
where an Option is not exercised in its entirety, to permit the Optionee to
deliver the shares of Common Stock previously acquired by him in payment of
shares of Common Stock to be received pursuant to the exercise of additional
portions of such Option, the effect of which
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<PAGE> 7
shall be that an Optionee can in sequence utilize such newly acquired shares of
Common Stock in payment of the exercise price of the entire Option, together
with such cash as shall be paid in respect of fractional shares and (iv) to
engage in any form of "cashless" exercise.
C. Withholding. The establishment of a procedure whereby a number
of shares of Common Stock or other securities may be withheld from the total
number of shares of Common Stock or other securities to be issued upon exercise
of an Option, or for the tender of cash or shares of Common Stock owned by the
Participant to meet the obligation of withholding for taxes incurred by the
Optionee upon such exercise.
D. Types of Options. The Committee may grant Incentive Stock
Options and Non-Qualified Stock Options.
SECTION V
STOCK OPTIONS
The Committee shall have the authority, in its discretion, to
grant Incentive Stock Options or to grant Non-Qualified Stock Options or to
grant both types of Options. No Option shall be granted for a term of more than
ten (10) years. Notwithstanding anything contained herein to the contrary, an
Incentive Stock Option may be granted only to common law employees of the
Corporation or of any Parent or Subsidiary now existing or hereafter formed or
acquired, and not to any director, officer, consultant or service provider who
is not also such a common law employee. The terms and conditions of the Options
shall be determined from time to time by the Committee; provided, however, that
the Options granted under the Plan shall be subject to the following:
A. Exercise Price. The Committee shall establish the exercise
price at the time any Option is granted at such amount as the Committee shall
determine; provided, however, that the exercise price for each share of Common
Stock purchasable under any Incentive Stock Option granted hereunder shall be
such amount as the Committee shall, in its best judgment, determine to be not
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock at the date the Option is granted; and provided, further, that in
the case of an Incentive Stock Option granted to a person who, at the time such
Incentive Stock Option is granted, owns shares of stock of the Corporation or of
any Parent or Subsidiary which possess more than ten percent (10%) of the total
combined voting power of all classes of shares of stock of the Corporation or of
any Parent or Subsidiary, the exercise price for each share of Common Stock
shall be such amount as the Committee, in its best judgment, shall determine to
be not less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock at the date the Option is granted. The exercise price will
be subject to adjustment in accordance with the provisions of Section VI of the
Plan.
B. Payment of Exercise Price. The price per share of Common Stock
with respect to each Option shall be payable at the time the Option is
exercised. Such price shall be payable in cash or, in the discretion of the
Committee, pursuant to any of the methods set forth in Sections IV(A) or (B)
hereof. Shares of Common Stock delivered to the Corporation in payment of
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<PAGE> 8
the exercise price shall be valued at the Fair Market Value of the Common Stock
on the date preceding the date of the exercise of the Option.
C. Employment Requirement. Unless otherwise provided by the
Committee at the time an Option is granted or by subsequent amendment of the
Option, each Option by its terms shall require the Optionee to remain in the
continuous full-time employ of the Corporation, or of any Parent or Subsidiary,
for at least two (2) years from the date of grant of the Option before the right
to exercise any part of the Option (by him or any other person) will accrue.
D. Exercisability of Options. Each Option shall be exercisable in
whole or in part, or in installments, and at such time(s), and subject to the
fulfillment of any conditions on exercisability as may be determined by the
Committee at the time of the grant of such Options; provided, however, that no
Option be exercised at any one time for fewer than one hundred (100) shares of
Common Stock; and provided further, however, that any Option to acquire fewer
than one hundred (100) shares of Common Stock may nevertheless be exercised, but
shall be exercisable in whole only. Subject to the limitations contained in the
preceding sentence, the right to purchase shares of Common Stock shall be
cumulative so that when the right to purchase any shares of Common Stock has
accrued, such shares of Common Stock or any part thereof may be purchased at any
time thereafter until the expiration or termination of the Option. Unless
otherwise provided by the Committee at the time an Option is granted or by
subsequent amendment of the Option, no Option shall become exercisable prior to
January 1, 1999, except that, if the Corporation consummates a Public Offering
prior to January 1, 1999, then the date on which the earliest Options granted
pursuant to this Plan may be exercised (the "Initial Exercise Date") shall be
advanced to a date (the "Advanced Exercise Date") that is one hundred eighty
(180) days after the consummation of such Public Offering, but (unless otherwise
provided by the Committee at the time an Option is granted or by subsequent
amendment of the Option) in no event earlier than January 1, 1998, and the
respective dates on which all other Options granted pursuant to this Plan may be
exercised shall be advanced by an amount of time equal to the amount of time
between the Advanced Exercise Date and the Initial Exercise Date.
E. Expiration of Options. No Option by its terms shall be
exercisable after the expiration of ten (10) years from the date of grant of the
Option; provided, however, in the case of an Incentive Stock Option granted to a
person who, at the time such Option is granted, owns shares of stock of the
Corporation or of any Parent or Subsidiary possessing more than ten percent
(10%) of the total combined voting power of all classes of shares of stock of
the Corporation or of any Parent or Subsidiary, such Option shall not be
exercisable after the expiration of five (5) years from the date such Option is
granted.
F. Exercise Upon Death of Optionee. Subject to the provisions of
Sections V(C) and V(I) hereof, in the event of the death of the Optionee prior
to his termination of employment or service relationship with the Corporation or
with any Parent or Subsidiary, his estate (or other beneficiary, if so
designated in writing by the Participant) shall have the right, within one (1)
year (or such longer period as may be provided by the Committee at the time an
Option is granted or by
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<PAGE> 9
subsequent amendment of the Option) after the date of death (but in no case
after the expiration date of the Option(s)), to exercise his Option(s) with
respect to all or any part of the shares of Common Stock as to which the
deceased Optionee had not exercised his Option at the time of his death, but
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option) only to the extent the Option or Options
were exercisable as of the date of his death.
G. Exercise Upon Disability of Optionee. Subject to the
provisions of Sections V(C) and V(I) hereof, if an Optionee's employment or
service relationship with the Corporation or with any Parent or Subsidiary is
terminated because of Disability, he shall have the right, within one (1) year
(or such longer period as may be provided by the Committee at the time an Option
is granted or by subsequent amendment of the Option) after the date of such
termination (but in no case after the expiration of the Option(s)), to exercise
his Option(s) with respect to all or any part of the shares of Common Stock as
to which he had not exercised his Option at the time of such termination, but
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option) only to the extent such Option or Options
were exercisable as of the date of his termination of employment or service
relationship due to Disability.
H. Exercise Upon Optionee's Termination of Service. Except as
provided in the following sentence, if an Optionee's employment or service
relationship with the Corporation or with any Parent or Subsidiary is terminated
for any reason other than those specified in Sections V(F) and (G) above, he
shall have the right, within thirty (30) days (or such longer period as may be
provided by the Committee at the time an Option is granted or by subsequent
amendment of the Option) after the date of such termination (but in no case
after the expiration date of the Option(s)), to exercise his Option(s), but
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option) only with respect to that number of
shares of Common Stock that he was entitled to purchase pursuant to Options that
were exercisable immediately prior to such termination. If an Optionee's
employment or service relationship is terminated for Good Cause by the
Corporation or any Parent or Subsidiary, then the Optionee shall not have the
right to exercise any Options that are vested and nonforfeitable and such
Options shall be forfeited.
I. Buy-Out of Vested Options Not Yet Exercisable Upon
Termination. Unless otherwise provided by the Committee at the time an Option is
granted or by subsequent amendment of the Option, if an Optionee's employment or
service relationship is terminated for any reason other than death, Disability
or Good Cause, and such Optionee holds Options that are vested and
nonforfeitable, but which nevertheless are not yet exercisable, then such
Optionee shall surrender and sell to the Corporation, and the Corporation shall
purchase and acquire from such Optionee, all of such Options for a purchase
price equal to the excess, if any, of the total Fair Market Value of the shares
of Common Stock issuable upon the exercise of such Options, in effect at the
time of the termination of the employment or service relationship of such
Optionee, over the total exercise price of such Options. Such sale and purchase
shall occur not later than sixty (60) days after the date on which such
Optionee's employment or service relationship terminated. If the Corporation is
unable to pay the amount required to be paid to an Optionee pursuant to this
Section V(I) due to a restriction
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imposed on it under the terms of any bank loan or the terms of any instrument or
agreement evidencing any indebtedness or other obligation of the Corporation or
under the Delaware General Corporation Law, the obligations of the Corporation
under this Section V(I) shall be deferred until the Corporation is legally
permitted to make the payment required under this Section V(I).
J. Maximum Amount of Incentive Stock Options. Each Incentive
Stock Option shall provide that to the extent the aggregate of the (i) Fair
Market Value of the shares of Common Stock (determined as of the time of the
grant of the Option) subject to such Incentive Stock Option and (ii) the fair
market values (determined as of the date(s) of grant of the options in question)
of all other shares of Common Stock subject to incentive stock options granted
to an Optionee by the Corporation or any Parent or Subsidiary, which are
exercisable for the first time by any person during any calendar year, exceed(s)
One Hundred Thousand Dollars ($100,000), such excess shares of Common Stock
shall not be deemed to be purchased pursuant to Incentive Stock Options. The
terms of the immediately preceding sentence shall be applied by taking options
into account in the order in which they are granted.
K. Corporation's Call Upon Option Shares Upon Termination for
Good Cause. Unless otherwise provided by the Committee at the time an Option is
granted or by subsequent amendment of the Option, if an Optionee's employment or
service relationship is terminated for Good Cause, then the Corporation shall
have the right, but not the obligation, to purchase from such Optionee all
shares of Common Stock purchased by such Optionee pursuant to this Plan for a
purchase price equal to the exercise price of the Options pursuant to which such
shares of Common Stock were purchased. The Corporation shall exercise such right
by delivery of a written notice of exercise to such Optionee not later than
sixty (60) days after the date on which such Optionee's employment or service
relationship terminated. The closing of any purchase pursuant to the exercise of
such option shall occur not later than thirty (30) days after the delivery of
the notice by the Corporation of its notice of exercise, at the principal
executive offices of the Corporation, unless the Corporation otherwise agrees,
and at a time agreed upon by the Corporation and the Optionee. At such closing,
the Corporation shall pay to the Optionee the total purchase price for the
shares of Common Stock being purchased by wire transfer to an account designated
by such Optionee of immediately available funds in an amount equal to the total
purchase price, against delivery by such Optionee or his legal representative of
a certificate or certificates representing all of the shares being purchased
from such Optionee, together with a stock power duly executed in blank, with
signature guaranteed, free and clear of all liens, claims, charges and
encumbrances.
L. Corporation's Call Upon Non-Qualified Stock Option Shares Upon
Termination Other than for Good Cause. (i) Unless otherwise provided by the
Committee at the time an Option is granted or by subsequent amendment of the
Option, if an Optionee's employment or service relationship is terminated other
than by reason of death, Disability or Good Cause, then the Corporation shall
have the right, but not the obligation, to purchase from such Optionee all
shares of Common Stock previously acquired pursuant to the exercise of a
Non-Qualified Stock Option granted pursuant to this Plan for a purchase price
equal to the Fair Market Value of such shares in effect on the date on which
such Optionee's employment or service relationship is terminated, or such other
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amount as may be provided pursuant to the terms of such Optionee's Non-Qualified
Stock Option. The Corporation shall exercise such right by delivery of written
notice of exercise to such Optionee not later than sixty (60) days after the
date on which such Optionee's employment or service relationship is terminated
or such other date as may be provided pursuant to the terms of such Optionee's
Non-Qualified Stock Option. Such sale and purchase shall occur not later than
thirty (30) days after the date the Corporation provides its written notice of
exercise in accordance with the procedures set forth in Section V(K).
(ii) Unless otherwise provided by the Committee at the time an
Option is granted or by subsequent amendment of the Option, the Corporation
shall have the right, but not the obligation, to purchase shares of Common Stock
acquired by the Optionee or the Optionee's estate (or other beneficiary)
pursuant to the exercise of a Non-Qualified Stock Option after the Optionee's
termination of employment or service relationship pursuant to Section V(F) or
V(G) at a purchase price equal to the Fair Market Value of such shares in effect
on the date of such termination, or such other amount as may be provided
pursuant to the terms of such Optionee's Non-Qualified Stock Option. The
Corporation shall exercise such option by delivery of written notice of exercise
to such Optionee or the Optionee's estate (or beneficiary) not later than sixty
(60) days after the date of exercise by the Optionee or the Optionee's estate
(or beneficiary). Such sale and purchase shall occur not later than thirty (30)
days after the date the Corporation delivers its written notice of exercise in
accordance with the procedures set forth in Section V(K).
M. Corporation's Call Upon Incentive Stock Option Shares Upon
Termination Other than for Good Cause. (i) If the employment of the Optionee is
terminated other than by reason of Disability or Good Cause, then the
Corporation shall have the right, but not the obligation, to purchase from (x)
such Optionee or the Optionee's estate (or other beneficiary) all shares
previously acquired by the Optionee pursuant to the exercise of an Incentive
Stock Option granted pursuant to this Plan, or (y) the Optionee's estate (or
other beneficiary) pursuant to the exercise of an Incentive Stock Option granted
pursuant to this Plan, in accordance with Section V(F) after termination of
employment, for a purchase price equal to the total Fair Market Value of such
shares of Common Stock in effect on the date of termination of employment or
such other amount as may be provided pursuant to the terms of such Optionee's
Incentive Stock Option. The Corporation shall exercise such right by delivery of
a written notice of exercise to such Optionee or his legal representative not
later than sixty (60) days after the date of termination of employment or the
date of the exercise by the Optionee's legal representative of an Incentive
Stock Option in accordance with Section V(F), whichever is applicable. Such sale
and purchase shall occur not later than thirty (30) days after the date the
Corporation provides its written notice of exercise in accordance with the
procedures set forth in Section V(K).
(ii) If the employment of an Optionee is terminated by reason of
Disability, then the Corporation shall have the right, but not the obligation,
to purchase only such shares that have been acquired pursuant to the exercise of
an Incentive Stock Option and that have been held one (1) year or longer by the
Optionee, for a purchase price equal to the total Fair Market Value of such
shares determined as of the date of termination of employment or such other
amount as
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may be provided pursuant to the terms of such Optionee's Incentive Stock Option.
The Corporation shall exercise such right by delivery of written notice of
exercise to such Optionee not later than sixty (60) days after termination of
employment or such other date as may be provided pursuant to the terms of such
Optionee's Incentive Stock Option. Such sale and purchase shall occur not later
than thirty (30) days after the date the Corporation provides its written notice
of exercise in accordance with the procedures set forth in Section V(K).
(iii) The Corporation retains the right, but not the obligation,
to purchase shares of Common Stock acquired by the Optionee pursuant to the
exercise of an Incentive Stock Option in accordance with Section V(G) after
termination of employment if the employment of the Optionee is terminated by
reason of Disability, for a purchase price equal to the total Fair Market Value
of such shares of Common Stock, in effect on the date of termination of
employment or such other amount as may be provided pursuant to the terms of such
Optionee's Incentive Stock Option. The Corporation shall exercise such right by
delivery of a written notice of exercise to such Optionee at any time during the
period beginning on the date which is one (1) year after the date of the
exercise by the Optionee and ending sixty (60) days thereafter. Such sale and
purchase shall occur not later than thirty (30) days after the date the
Corporation provides its written notice of exercise in accordance with the
procedures set forth in Section V(K).
N. Right of First Refusal with Respect to Acquired Shares.
(i) If any Participant desires to sell, assign, encumber, pledge,
or otherwise transfer ("Transfer") any shares of Common Stock acquired pursuant
to this Plan to any person or entity other than the Corporation ("Third Party"),
except pursuant to a Transfer by an individual Participant of all or a portion
of such shares to his ancestors, descendants or spouse (other than as an
incident to the dissolution of marriage) (collectively, "Family Donees"), or to
trusts for the benefit of a Participant or any of his Family Donees, either
inter vivos or, subject to Sections V(F), V(G), V(L) and V(M) hereof, pursuant
to applicable laws of descent and distribution, if such Family Donee or such
trust agrees in writing to be bound by the terms of the restriction contained
herein, such Transfer shall be made only in accordance with the terms of this
Plan and only for cash or cash equivalents.
(ii) Upon receipt by a Participant of any bona fide offer to
purchase all or any portion of the shares of Common Stock owned by such
Participant, his Family Donees, or trusts for his or their benefit, then the
party desiring to make such Transfer ("Offering Party") shall deliver written
notice ("Offer Notice") to the Corporation specifying the name of the Third
Party that is the proposed purchaser of the shares of Common Stock, the number
of shares proposed to be Transferred, the price to be paid in the proposed sale
and all other material conditions of the proposed sale. The Offering Party shall
notify the Corporation of any material changes in the terms of such proposed
Transfer, and such notice shall be treated as an original Offer Notice.
(iii) The Corporation shall have the right, but not the
obligation, to purchase all or any part of the shares of Common Stock offered
pursuant to the Offer Notice for the price and on the
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terms specified in the Offer Notice by delivery of a written notice of exercise
within sixty (60) days after the receipt of the Offer Notice. The closing of any
purchase of shares shall occur within thirty (30) days after the delivery by the
Corporation of its notice of exercise of its rights under this Section V(N) in
accordance with the procedures set forth in Section V(K).
O. Assignability of Corporation's Rights in Certain Events. If
the Corporation is unable to exercise the rights granted to it pursuant to
Sections V(K), V(L), V(M) or V(N) due to a restriction imposed upon it under the
terms of any bank loan or the terms of any instrument or agreement evidencing
any indebtedness or other obligation of the Corporation or under an applicable
provision of the Delaware General Corporation Law, then it will offer to assign
its rights to Cameron by delivery to Cameron of written notice of such offer.
Cameron shall have the right, but not the obligation, to assign his rights under
this Section V(O) to one or more Cameron Affiliates. Cameron and/or the Cameron
Affiliates may exercise the rights of the Corporation to purchase shares of
Common Stock and/or Options assigned pursuant to this Section V(O) by delivery
of a written notice of exercise to the Corporation and the Participant not later
than fifteen (15) days after the delivery by the Corporation of its offer notice
to Cameron. If Cameron and/or the Cameron Affiliates exercise such rights, then
Cameron and/or the Cameron Affiliates shall purchase such shares of Common Stock
and/or Options from the Participant and/or his legal representative on the same
terms and subject to the same conditions as are applicable to the Corporation
under this Plan. If Cameron and/or the Cameron Affiliates do not exercise their
rights pursuant to this Section V(O), then the rights and obligations of the
Corporation under Sections V(K), V(L), V(M) and V(N) shall be deemed to have
been satisfied.
P. Applicability of Certain Provisions Prior to Public Offering.
The provisions of Sections V(L), V(M), V(N) and V(O) shall apply only prior to
the consummation by the Corporation of a Public Offering.
SECTION VI
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
A. Recapitalization, Etc. In the event there is any change in the
Common Stock of the Corporation by reason of any reorganization,
recapitalization, stock split, stock dividend or otherwise, there shall be
substituted for or added to each share of Common Stock theretofore appropriated
or thereafter subject, or which may become subject, to any Option, the number
and kind of shares of stock or other securities into which each outstanding
share of Common Stock shall be so changed or for which each such share shall be
exchanged, or to which each such share be entitled, as the case may be, and the
per share price thereof also shall be appropriately adjusted. Notwithstanding
the foregoing, (i) each such adjustment with respect to an Incentive Stock
Option shall comply with the rules of Section 424(a) of the Code and (ii) in no
event shall any adjustment be made which would render any Incentive Stock Option
granted hereunder to be other than an incentive stock option for purposes of
Section 422 of the Code.
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B. Merger, Consolidation or Change in Control of Corporation.
Upon (i) the merger or consolidation of the Corporation with or into another
corporation (pursuant to which the stockholders of the Corporation immediately
prior to such merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in the voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's then outstanding securities), if
the agreement of merger or consolidation does not provide for (A) the
continuance of the Options granted hereunder or (B) the substitution of new
Options granted hereunder, or for the assumption of such Options by the
surviving corporation, (ii) the dissolution, liquidation, or sale of
substantially all the assets, of the Corporation or (iii) the Change in Control
of the Corporation, then the Committee shall have the authority, in its
discretion, to provide that holders of some or all of any such Options
theretofore granted and still outstanding (and not otherwise expired) shall have
the right immediately prior to the effective date of such merger, consolidation,
dissolution, liquidation, sale of assets or Change in Control of the Corporation
to exercise such Option(s) in whole or in part and shall have the authority, in
its discretion further to provide that any such Option may be exercised without
regard to any installment provision that may have been made part of the terms
and conditions of such Option(s), provided that (unless otherwise provided by
the Committee at the time an Option is granted or by subsequent amendment of the
Option) any conditions precedent to the exercise of such Options, other than the
passage of time, have occurred. The Corporation, to the extent practicable,
shall give advance notice to affected Optionees of any such merger,
consolidation, dissolution, liquidation, sale of assets or Change in Control of
the Corporation. If the Committee makes such provision, then all such Options
which are not so exercised shall be forfeited as of the effective time of any
merger, consolidation, dissolution, liquidation or sale of assets (but not in
the case of a Change in Control of the Corporation).
C. Definition of Change in Control of the Corporation. As used
herein, a "Change in Control of the Corporation" shall be deemed to have
occurred if any person (including any individual, firm, partnership or other
entity) together with all Affiliates and Associates of such person acquires
beneficial ownership, directly or indirectly, of securities of the Corporation
having more than 50% of the combined voting power of the Corporation's then
outstanding securities, such person being hereinafter referred to as an
Acquiring Person. For purposes of this Section VI(C), an Acquiring Person
(including its Affiliates and Associates) shall be determined by excluding (i) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation or any subsidiary of the Corporation, (ii) a corporation owned,
directly or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of the Corporation, (iii) the
Corporation or any subsidiary of the Corporation, (iv) any person who, as of the
effective date of this Plan, is the "Beneficial Owner" (as defined in Rule 13(d)
promulgated under the Exchange Act), directly or indirectly, of securities of
the Corporation having more than 50% of the combined voting power of the
Corporation's then outstanding securities, or (v) only as provided in the
immediately following sentence, a Participant, together with all Affiliates and
Associates of a Participant, who is or becomes the Beneficial Owner. The
provisions of clause (v) of the immediately preceding sentence shall apply only
in determining whether a Change in Control of the Corporation has occurred with
respect to the Option(s) held by the Participant who, together with his
Affiliates or Associates, if any, is or becomes the direct or indirect
Beneficial Owner of the percentage of securities set forth above.
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SECTION VII
MISCELLANEOUS PROVISIONS
A. Administrative Procedures. The Committee may establish any
procedures determined by it to be appropriate in discharging its
responsibilities under the Plan. Subject to the provisions of Section X hereof,
all actions and decisions of the Committee shall be final.
B. Assignment or Transfer. No grant or award of any Option made
under the Plan or any rights or interests therein shall be assignable or
transferable by a Participant except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order. During the
lifetime of a Participant Options granted hereunder shall be exercisable only by
the Participant.
C. Investment Representation. In the case of receipt of shares of
Common Stock or other securities upon exercise of an Option, the Committee may
require, as a condition of receiving such securities, that the Participant
furnish to the Corporation such written representations and information as the
Committee deems appropriate to permit the Corporation, in light of the existence
or nonexistence of an effective registration statement under the Securities Act
to deliver such securities in compliance with the provisions of the Securities
Act.
D. Withholding Taxes. The Corporation shall have the right to
deduct from all cash payments hereunder any federal, state, local or foreign
taxes required by law to be withheld with respect to such payments. In the case
of the issuance or distribution of Common Stock or other securities hereunder,
the Corporation, as a condition of such issuance or distribution, may require
the payment (through withholding from the Participant's salary, reduction of the
number of shares of Common Stock or other securities to be issued, or otherwise)
of any such taxes. Subject to the consent of the Committee, the Participant may
satisfy the withholding obligations by paying to the Corporation a cash amount
equal to the amount required to be withheld or by tendering to the Corporation a
number of shares of Common Stock having a value equivalent to such cash amount,
or by use of any available procedure as described under Section IV(C) hereof.
E. Costs and Expenses. The costs and expenses of administering
the Plan shall be borne by the Corporation and shall not be charged against any
award nor to any employee, director, consultant, or other service provider
receiving an Option.
F. Funding of Plan. The Plan shall be unfunded. The Corporation
shall not be required to segregate any of its assets to assure the payment of
any Option under the Plan. Neither the Participants nor any other persons shall
have any interest in any fund or in any specific asset or assets of the
Corporation or any other entity by reason of any Option, except to the extent
expressly provided hereunder. The interests of each Participant and former
Participant hereunder are unsecured and shall be subject to the general
creditors of the Corporation.
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<PAGE> 16
G. Other Incentive Plans. The adoption of the Plan does not
preclude the adoption by appropriate means of any other incentive plan for
employees, directors, consultants, or other service providers.
H. Plurals and Gender. Where appearing in the Plan, masculine
gender shall include the feminine and neuter genders, and the singular shall
include the plural, and vice versa, unless the context clearly indicates a
different meaning.
I. Headings. The headings and sub-headings in this Plan are
inserted for the convenience of reference only and are to be ignored in any
construction of the provisions hereof.
J. Severability. In case any provision of this Plan shall be held
illegal or void, such illegality or invalidity shall not affect the remaining
provisions of this Plan, but shall be fully severable, and the Plan shall be
construed and enforced as if said illegal or invalid provisions had never been
inserted herein.
K. Payments Due Missing Persons. The Corporation shall make a
reasonable effort to locate all persons entitled to benefits under the Plan;
however, notwithstanding any provisions of this Plan to the contrary, if, after
a period of one (1) year from the date such benefits shall be due, any such
persons entitled to benefits have not been located, their rights under the Plan
shall stand suspended. Before this provision becomes operative, the Corporation
shall send a certified letter to all such persons at their last known addresses
advising them that their rights under the Plan shall be suspended. Subject to
all applicable state laws, any such suspended amounts shall be held by the
Corporation for a period of one (1) additional year and thereafter such amounts
shall be forfeited and thereafter remain the property of the Corporation.
L. Liability and Indemnification. (i) Neither the Corporation nor
any Parent or Subsidiary shall be responsible in any way for any action or
omission of the Committee, or any other fiduciaries in the performance of their
duties and obligations as set forth in this Plan. Furthermore, neither the
Corporation nor any Parent or Subsidiary shall be responsible for any act or
omission of any of their agents, or with respect to reliance upon advice of
their counsel provided that the Corporation and/or the appropriate Parent or
Subsidiary relied in good faith upon the action of such agent or the advice of
such counsel.
(ii) Except for their own gross negligence or willful misconduct
regarding the performance of the duties specifically assigned to them under, or
their willful breach of the terms of, this Plan, the Corporation, each Parent
and Subsidiary and the Committee shall be held harmless by the Participants,
former Participants, beneficiaries and their representatives against liability
or losses occurring by reason of any act or omission. Neither the Corporation,
any Parent or Subsidiary, the Committee, nor any agents, employees, officers,
directors or shareholders of any of them, nor any other person shall have any
liability or responsibility with respect to this Plan, except as expressly
provided herein.
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<PAGE> 17
M. Incapacity. If the Committee shall receive evidence
satisfactory to it that a person entitled to receive shares of Common Stock
pursuant to an exercise of an Option is, at the time when such shares become
issuable, a minor, or is physically or mentally incompetent to receive such
shares and to give a valid release thereof, and that another person or an
institution is then maintaining or has custody of such person and that no
guardian, committee or other representative of the estate of such person shall
have been duly appointed, the Committee may make the transfer of such Common
Stock otherwise payable to such person to such other person or institution,
including a custodian under a Uniform Gifts to Minors Act, or corresponding
legislation (who shall be an adult, a guardian of the minor or a trust company),
and the release by such other person or institution shall be a valid and
complete discharge for the transfer of such Common Stock.
N. Cooperation of Parties. All parties to this Plan and any
person claiming any interest hereunder agree to perform any and all acts and
execute any and all documents and papers which are necessary or desirable for
carrying out this Plan or any of its provisions.
O. Governing Law. All questions pertaining to the validity,
construction and administration of the Plan shall be determined in accordance
with the laws of the State of Delaware, without reference to the conflicts of
law principles thereof.
P. Nonguarantee of Employment or Service Relationship. Nothing
contained in this Plan shall be construed as a contract of employment or service
relationship between the Corporation (or any Parent or Subsidiary), and any
Participant, as a right of any Participant to be continued in the employment of,
or service relationship with, the Corporation (or any Parent or Subsidiary), or
as a limitation on the right of the Corporation or any Parent or Subsidiary to
discharge any of its employees, directors, consultants or other service
providers, with or without cause.
Q. Notices. Each notice relating to this Plan shall be in writing
and delivered in person or by certified mail to the proper address. All notices
to the Corporation or the Committee shall be addressed to it at 6 International
Drive, Rye Brook, New York 10573, Attn: Senior Vice President, Human Resources.
All notices to Participants, former Participants, beneficiaries or other persons
acting for or on behalf of such persons shall be addressed to such person at the
last address for such person maintained in the Committee's records.
R. Written Agreements. Each Option shall be evidenced by a signed
written agreement between the Corporation and the Participant containing the
terms and conditions of the Option.
SECTION VIII
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have the right to
amend, suspend or terminate the Plan at any time, provided that no amendment
shall be made which shall increase the total number of shares of the Common
Stock of the Corporation which may be issued and sold pursuant to Options,
reduce the minimum exercise price in the case of an Incentive Stock Option
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<PAGE> 18
or modify the provisions of the Plan relating to eligibility with respect to
Incentive Stock Options unless such amendment is made by or with the approval of
the stockholders (such approval being granted within twelve (12) months of the
effective date of such amendment). The Board of Directors of the Corporation
shall be authorized to amend the Plan and the Options granted thereunder (i) to
maintain qualification as "incentive stock options" within the meaning of
Section 422 of the Code, if applicable or (ii) to comply with Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder. Except as
otherwise provided herein, no amendment, suspension or termination of the Plan
shall alter or impair any Options previously granted under the Plan, without the
consent of the holder thereof.
SECTION IX
TERM OF PLAN
The Plan shall remain in effect until the tenth anniversary of
the date the Plan was adopted by the Board of Directors of the Corporation,
unless sooner terminated by such Board of Directors. No Options may be granted
under the Plan subsequent to the termination of the Plan.
SECTION X
CLAIMS PROCEDURES
A. Denial. If any Participant, former Participant or beneficiary
is denied any vested benefit to which he is, or reasonably believes he is,
entitled under this Plan, either in total or in an amount less than the full
vested benefit to which he would normally be entitled, the Committee shall
advise such person in writing the specific reasons for the denial. The Committee
shall also furnish such person at the time with a written notice containing (i)
a specific reference to pertinent Plan provisions, (ii) a description of any
additional material or information necessary for such person to perfect his
claim, if possible, and an explanation of why such material or information is
needed and (iii) an explanation of the Plan's claim review procedure.
B. Written Request for Review. Within sixty (60) days of receipt
of the information stated in subsection (a) above, such person shall, if he
desires further review, file a written request for reconsideration with the
Committee.
C. Review of Document. So long as such person's request for
review is pending (including the sixty (60) day period in subsection (b) above),
such person or his duly authorized representative may review pertinent Plan
documents and may submit issues and comments in writing to the Committee.
D. Committee's Final and Binding Decision. A final and binding
decision shall be made by the Committee within sixty (60) days of the filing by
such person of this request for reconsideration; provided, however, that if the
Committee, in its discretion, feels that a hearing with such person or his
representative is necessary or desirable, this period shall be extended for an
additional sixty (60) days.
E. Transmittal of Decision. The Committee's decision shall be
conveyed to such person in writing and shall (i) include specific reasons for
the decision, (ii) be written in a manner
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<PAGE> 19
calculated to be understood by such person and (iii) set forth the specific
references to the pertinent Plan provisions on which the decision is based.
F. Limitation on Claims. Notwithstanding any provisions of this
Plan to the contrary, no Participant (nor the estate or other beneficiary of a
Participant) shall be entitled to assert a claim against the Corporation (or
against any Parent or Subsidiary) more than three (3) years after the date the
Participant (or his estate or other beneficiary) initially is entitled to
receive benefits hereunder.
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<PAGE> 20
INCENTIVE STOCK OPTION AGREEMENT
AGREEMENT made as of the date set forth in Section 27 hereof
between ENTEX Holdings, Inc., a Delaware corporation (hereinafter referred to as
the "Company"), and the Employee named in Section 27 hereof, residing at the
address set forth in Section 27 hereof (hereinafter referred to as the
"Employee").
W I T N E S S E T H :
---------------------
WHEREAS, the Company desires, in connection with the employment
of the Employee and in accordance with its 1996 Stock Option Plan (the "Plan"),
to provide the Employee with an opportunity to acquire Common Stock, par value
$0.001 per share (hereinafter referred to as "Common Stock"), in order to link
the personal interest of the Employee to those of the stockholders, customers
and employees of the Company and its subsidiaries, by providing an incentive for
outstanding performance.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein set forth and other good and valuable consideration, the
Company and the Employee hereby agree as follows:
1. Confirmation of Grant of Option. Pursuant to a
determination by the Stock Option Committee of the Board of Directors of the
Company authorized to administer the Plan, made on the date of grant set forth
in Section 27 hereof (the "Date of Grant") the Company, subject to the terms of
the Plan and this Agreement, hereby confirms that the Employee has been granted
as a matter of separate inducement and agreement, and in addition to and not in
lieu of salary or other compensation for services, the right to purchase
(hereinafter referred to as the "Option") an aggregate number of shares of
Common Stock set forth in Section 27 hereof, subject to adjustment as provided
in Section 10 hereof (such shares, as adjusted, shall hereinafter be referred to
as the "Shares"). The Option is intended to qualify as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of shares of Common
Stock covered by the Option will be the cash amount per share set forth in
Section 27 hereof, being not less than the percentage of the Fair Market Value
of a share of Common Stock on the Date of Grant set forth in Section 27 hereof,
subject to adjustment as provided in Section 10 hereof.
3. Exercise of Option. The Option shall become vested and
exercisable on the terms and conditions hereinafter set forth:
(a) The Option shall become vested and nonforfeitable
cumulatively as to the following amounts of the number of Shares originally
subject thereto (after giving effect to any adjustment pursuant to Section 10
hereof), on the dates indicated:
(i) as to one half of the Shares, on and after the date
which is two (2) years after the Date of Grant; and
(ii) as to the remaining Shares, on and after the date
which is three (3) years after the Date of Grant.
<PAGE> 21
(b) This Option, to the extent vested and nonforfeitable
pursuant to the provisions of Section 3(a) hereof, shall become exercisable as
of the later of:
(i) the date or dates it becomes so vested and
nonforfeitable; or
(ii) the earlier of (A) January 1, 1999, or (B) if the
Company completes a Public Offering prior to January 1, 1999, the date
which is 180 days after the date of the consummation of the Public
Offering, but in no event earlier than January 1, 1998.
(c) The Option may be exercised pursuant to the provisions
of this Section 3, by notice and payment to the Company as provided in Sections
13 and 18 hereof.
4. Term of Option. The term of the Option shall be the
period after the Date of Grant set forth in Section 27 hereof, subject to
earlier termination or cancellation as provided in this Agreement. This Option,
to the extent unexercised, shall expire at the end of the period set forth in
the immediately preceding sentence. The holder of the Option shall not have any
rights to dividends or any other rights of a stockholder with respect to any
shares of Common Stock subject to the Option until such shares shall have been
issued to him (as evidenced by the appropriate entry on the books of a duly
authorized transfer agent of the Company) provided that the date of issuance
shall not be earlier than the Closing Date (as hereinafter defined with respect
to such shares pursuant to Section 13 hereof) upon purchase of such shares upon
exercise of the Option.
5. Non-transferability of Option. The Option shall not be
transferable otherwise than by will or by the laws of descent and distribution
or pursuant to a domestic relations order, and the Option may be exercised
during the lifetime of the Employee only by him. More particularly, but without
limiting the generality of the foregoing, the Option may not be assigned,
transferred (except as provided in the next preceding sentence) or otherwise
disposed of, or pledged or hypothecated in any way, and shall not be subject to
execution, attachment or other process. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option attempted contrary to the
provisions of this Agreement, or any levy of execution, attachment or other
process attempted upon the Option, will be null and void and without effect. Any
attempt to make any such assignment, transfer, pledge, hypothecation or other
disposition of the Option or any attempt to make any such levy of execution,
attachment or other process will cause the Option to terminate immediately upon
the happening of any such event; provided, however, that any such termination of
the Option under the foregoing provisions of this Section 5 will not prejudice
any rights or remedies which the Company or any Parent or Subsidiary may have
under this Agreement or otherwise.
6. Exercise Upon Termination of Employment. (a) If the
Employee at any time ceases to be an employee of the Company and of all Parents
or Subsidiaries thereof by reason of his discharge for Good Cause, the Option
shall forthwith terminate and the Employee shall forfeit all rights hereunder.
If, however, the Employee for any other reason (other than Disability or death)
ceases to be such an employee, the Option may, subject to the provisions of
Sections 5 and 9 hereof, be exercised by the Employee to the same extent the
Employee would have been entitled under Section 3 hereof to exercise the Option
on the day immediately before the date of such termination of employment, at any
time within thirty (30) days after such termination of employment, at the end of
which period the Option to the extent not then
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<PAGE> 22
exercised, shall terminate and the Employee shall forfeit all rights hereunder,
even if the Employee subsequently becomes employed by the Company or any Parent
or Subsidiary. In no event, however, may the Option be exercised after the
expiration of the term provided in Section 4 hereof.
(b) The Option shall not be affected by any change of
duties or position of the Employee so long as he continues to be a full-time
employee of the Company or any Parent or Subsidiary thereof. If the Employee is
granted a temporary leave of absence, such leave of absence shall be deemed a
continuation of his employment by the Company or any Parent or Subsidiary
thereof for the purposes of this Agreement, but only if and so long as the
employing corporation consents thereto.
7. Exercise Upon Death or Disability. (a) If the Employee
dies before the termination of his employment by the Company or by any Parent or
Subsidiary and on or after the first date upon which he would have been entitled
to exercise the Option under the provisions of Section 3 hereof, the Option may,
subject to the provisions of Sections 5 and 9 hereof, be exercised with respect
to all or any part of the shares of Common Stock as to which the deceased
Employee had not exercised the Option at time of his death (but only to the
extent the Option was exercisable at such time), by the estate of the Employee
(or by the person or persons who acquire the right to exercise the Option by
written designation of the Employee) at any time within the period ending one
(1) year after the death of the Employee, at the end of which period the Option,
to the extent not then exercised, shall terminate and the estate or other
beneficiaries shall forfeit all rights hereunder. In no event, however, may the
Option be exercised after the expiration of the term provided in Section 4
hereof.
(b) In the event that the employment of the Employee by
the Company and any Parent or Subsidiary is terminated by reason of the
Disability of the Employee on or after the first date upon which he would have
been entitled to exercise the Option under the provisions of Section 3 hereof,
the Option may, subject to the provisions of Sections 5 and 9 hereof, be
exercised with respect to all or any part of the shares of Common Stock as to
which he had not exercised the Option at the time of the termination of the
Employee's employment due to his Disability (but only to the extent the Option
was exercisable at such time) by the Employee, at any time within the period
ending one (1) year after the date of such termination of employment, at the end
of which period the Option, to the extent not then exercised, shall terminate
and the Employee shall forfeit all right hereunder even if the Employee
subsequently becomes employed by the Company or any Parent or Subsidiary. In no
event, however, may the Option be exercised after the expiration of the term
provided in Section 4 hereof.
8. Special Rules Regarding Exercisability of the Option.
(a) Each time the Employee elects to exercise his rights to purchase shares of
Common Stock pursuant to the terms of this Option, such exercise may be for no
fewer than one hundred (100) shares of Common Stock; provided, however, that if
this Option is exercisable in whole for fewer than one hundred (100)shares, such
Option may nevertheless be exercised, but may be exercised in whole only.
(b) If the employment of the Employee is terminated by the
Company and all Parent or Subsidiaries thereof for any reason other than death,
Disability or Good Cause, on and after the date he has a vested interest in a
portion or all of the Option granted under this Agreement, but prior to the date
this Option is first exercisable, the Option to purchase shares of Common Stock
hereunder shall be canceled in its entirety and, in consideration therefor, the
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<PAGE> 23
Employee shall be paid an amount in cash equal to the product of (i) the number
of shares of Common Stock for which the Option granted hereunder is exercisable
on the date of such termination of employment, multiplied by (ii) an amount in
cash equal to the excess (if any) of the Fair Market Value of one share of
Common Stock in effect on such date over the exercise price set forth herein for
the purchase of one share of Common Stock. Such payment shall be made not later
than sixty (60) days after the date on which the Employee's employment
terminated. If the Company is unable to pay the amount required to be paid to
the Employee pursuant to this Section 8(b) due to a restriction imposed upon it
under the terms of any bank loan or the terms of any instrument or agreement
evidencing any indebtedness or other obligation of the Company or under the
Delaware General Corporation Law, then the obligation of the Company under this
Section 8(b) shall be deferred until the Corporation is legally permitted to
make the payment required under this Section 8(b).
9. Limitation on Exercisabilty. To the extent the aggregate
of the (a) Fair Market Value of Common Stock (determined as of the date of this
Agreement) subject to purchase under this Option and (b) the fair market values
(determined as of the appropriate date(s) of grant) of all other shares of stock
subject to incentive stock options granted to the Employee by the Company or any
Parent or Subsidiary, which are exercisable for the first time by the Employee
during any calendar year, exceed(s) One Hundred Thousand Dollars ($100,000),
such excess shares of stock shall not be deemed to be purchased pursuant to
incentive stock options. The terms of the immediately preceding sentence shall
be applied by taking options into account in the order in which they are
granted.
10. Adjustments. In the event there is any change in the
Common Stock of the Company by reason of any reorganization, recapitalization,
stock split, stock dividend or otherwise, there shall be substituted for or
added to each share of Common Stock theretofore appropriated or thereafter
subject, or which may become subject, to this Option the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock shall be so changed or for which each such share shall be exchanged, or to
which each such share be entitled, as the case may be, and the per share price
thereof also shall be appropriately adjusted; provided, however, that (i) no
such adjustment shall be made so as to deem such modification, extension or
renewal of the Option as the issuance of a new option under Section 424(h) of
the Code, or so as to prevent the Company or any other corporation or subsidiary
thereof, if the Employee shall become employed by such corporation by reason of
the transaction in respect of which such adjustment is made, from being a
corporation issuing or assuming the Option in a transaction to which Section
424(a) of the Code applies and (ii) in no event shall any adjustment be made
which would render any option granted hereunder to be other than an incentive
stock option for purposes of Section 422(a) of the Code.
11. Merger or Consolidation, Etc. of the Company. Subject to
the provisions of Section 9 hereof, upon (a) the merger or consolidation of the
Company with or into another corporation (pursuant to which the stockholders of
the Company immediately prior to such merger or consolidation will not, as of
the date of such merger or consolidation, own a beneficial interest in a
majority of shares of voting securities of the corporation surviving such merger
or consolidation having at least a majority of the combined voting power of such
corporation's then outstanding securities), if the agreement of merger or
consolidation does not provide for (i) the continuance of this Option, or (ii)
the substitution of new option(s) for this Option, or for the assumption of such
Option by the surviving corporation, (b) the dissolution, liquidation, or sale
of substantially all the assets, of the Company or (c) if applicable to the
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<PAGE> 24
Option granted hereunder, a Change in Control of the Company, then, if and to
the extent that the Company so determines in its discretion and as provided in
the Plan, the Employee shall have the right immediately prior to the effective
date of such merger, consolidation, dissolution, liquidation, sale of assets or
Change in Control of the Company, to exercise this Option (to the extent not
exercised and not otherwise expired or terminated) in whole or in part without
regard to any installment provision that may have been made part of the terms
and conditions of this Option provided that any conditions precedent to the
exercise of this Option, other than the passage of time, have occurred. The
Company, to the extent practicable, shall give advance notice to the Employee of
such merger, consolidation, dissolution, liquidation, sale of assets or Change
in Control of the Company. To the extent that the Company makes such a
determination in accordance with this Section 11 and this Option is not so
exercised, it shall be forfeited as of the effective time of any merger,
consolidation, dissolution, liquidation or sale of assets (but not in the case
of a Change in Control of the Company).
12. Registration. If the issuance of shares of Common Stock
subject hereto upon the exercise hereof has not been registered under the
Securities Act of 1933, as amended, then, upon the request of the Company, the
Employee will give a representation as to his investment intent with respect to
such shares prior to their issuance pursuant to Section 13 hereof. The Company
may register or qualify the shares covered by the Option for sale pursuant to
the Securities Act of 1933, as amended, at any time prior to or after the
exercise in whole or in part of the Option.
13. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by the delivery of
written notice (substantially, in the form of Exhibit A hereto) and payment to
the Company in accordance with the procedure prescribed herein. Each such notice
shall:
(i) state the election to exercise the Option and the
number of Shares in respect of which it is being exercised;
(ii) contain a representation and agreement as to
investment intent, if required by counsel to the Company with respect to
such Shares, in form satisfactory to counsel for the Company;
(iii) be signed by the Employee or the person or persons
entitled to exercise the Option and, if the Option is being exercised by
any person or persons other than the Employee, be accompanied by proof,
satisfactory to counsel for the Company, of the right of such person or
persons to exercise the Option; and
(iv) be received by the Company on or before the date of
the expiration of this Option. In the event the date of expiration of
this Option falls on a day which is not a regular business day at the
Company's executive office in Rye Brook, New York then such written
notice must be received at such office on or before the last regular
business day prior to such date of expiration.
(b) Upon receipt of such notice, the Company shall
specify, by written notice to the Employee or to the person or persons
exercising the Option, a date and time (such date and time being herein called
the "Closing Date") and place for payment of the full purchase price of such
Shares. The Closing Date shall not be more than thirty (30) days after the date
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<PAGE> 25
the notice of exercise is received by the Company unless another date is agreed
upon by the Company and the Employee or the person or persons exercising the
Option or is required upon advice of counsel for the Company in order to meet
the requirements of Section 14 hereof.
(c) Payment of the purchase price of any shares of Common Stock,
in respect of which the Option shall be exercised, shall be made by the Employee
or such person or persons at the place specified by the Company on or before the
Closing Date by delivering to the Company (i) a check payable of the order of
the Company, or unless otherwise provided in Section 27 hereof, by (ii) properly
endorsed certificates of shares of Common Stock (or certificates accompanied by
an appropriate stock power) with signature guaranties by a bank or trust company
or New York Stock Exchange member firm representing shares of Common Stock
having a Fair Market Value equal to the aggregate exercise price of the shares
being acquired pursuant to this Option, it being understood and agreed that if
this Option is not exercised in whole, the Employees shall be permitted to
deliver shares previously acquired pursuant to prior exercises of this Option in
payment of the exercise price upon a subsequent exercise of this Option, except
that fractional shares shall be paid for in cash, (iii) to have withheld from
the total number of shares of Common Stock to be acquired upon the exercise of
an Option that number of shares having a Fair Market Value equal to the
aggregate exercise price of the shares being acquired pursuant to this Option,
except that fractional shares shall be paid for in cash, or (iv) any combination
of the foregoing.
(d) The Option shall be deemed to have been exercised with
respect to any particular shares of Common Stock if, and only if, the preceding
provisions of this Section 13 and the provisions of Section 14 hereof shall have
been complied with, in which event the Option shall be deemed to have been
exercised on the date the notice of exercise of the Option was received by the
Company. Anything in this Agreement to the contrary notwithstanding, any notice
of exercise given pursuant to the provisions of this Section 13 shall be void
and of no effect if all the preceding provisions of this Section 13 and the
provisions of Section 14 shall not have been complied with.
(e) The certificate or certificates for shares of Common Stock as
to which the Option shall be exercised will be registered in the name of the
Employee (or in the name of the Employee's estate or other beneficiary if the
Option is exercised after the Employee's death), or if the Option is exercised
by the Employee and if the Employee so requests in the notice exercising the
Option, will be registered in the name of the Employee and another person
jointly, with right of survivorship and will be delivered on the Closing Date to
the Employee at the place specified for the closing, but only upon compliance
with all of the provisions of this Agreement.
(f) If the Employee fails to accept delivery of and pay for all
or any part of the number of Shares specified in such notice upon tender or
delivery thereof on the Closing Date, his right to exercise the Option with
respect to such undelivered Shares may be terminated in the sole discretion of
the Board of Directors of the Company. The Option may be exercised only with
respect to full Shares.
(g) The Company shall not be required to issue or deliver any
certificate or certificates for shares of its Common Stock purchased upon the
exercise of any part of this Option prior to the payment to the Company, upon
its demand, of any amount requested by the Company for the purpose of satisfying
its liability, if any, to withhold state or local
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<PAGE> 26
income or earnings tax or any other applicable tax or assessment (plus interest
or penalties thereon, if any, caused by a delay in making such payment) incurred
by reason of the exercise of this Option or the transfer of shares thereupon.
Such payment shall be made by the Employee in cash or, with the consent of the
Company, by tendering to the Company shares of Common Stock equal in value to
the amount of the required withholding. In the alternative, the Company may, at
its option, satisfy such withholding requirements by withholding from the shares
of Common Stock to be delivered to the Employee pursuant to an exercise of this
Option a number of shares of Common Stock equal in value to the amount of the
required withholding.
14. Approval of Counsel. The exercise of the Option and the
issuance and delivery of shares of Common Stock pursuant thereto shall be
subject to approval by the Company's counsel of all legal matters in connection
therewith, including compliance with the requirements of the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder, and the requirements of any stock exchange
upon which the Common Stock may then be listed.
15. Resale of Common Stock. (a) If so requested by the
Company, upon any sale or transfer of the Common Stock purchased upon exercise
of the Option, the Employee shall deliver to the Company an opinion of counsel
satisfactory to the Company to the effect that either (i) the Common Stock to be
sold or transferred has been registered under the Securities Act of 1933, as
amended, and that there is in effect a current prospectus meeting the
requirements of Section 10(a) of said Act which is being or will be delivered to
the purchaser or transferee at or prior to the time of delivery of the
certificates evidencing the Common Stock to be sold or transferred, or (ii) such
Common Stock may then be sold without violating Section 5 of said Act.
(b) The Common Stock issued upon exercise of the Option shall be
subject to the restrictions set forth in Exhibit B hereto and shall bear the
following legend if required by the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN A STOCK OPTION AGREEMENT BY AND BETWEEN THE
HOLDER HEREOF AND ENTEX HOLDINGS, INC. AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL (I) ALL OF SUCH
RESTRICTIONS HAVE EXPIRED OR HAVE BEEN WAIVED BY ENTEX HOLDINGS, INC.
AND (II) SUCH SHARES HAVE FIRST BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (UNLESS, IN THE OPINION OF COUNSEL FOR ENTEX
HOLDINGS, INC., SUCH REGISTRATION IS NOT REQUIRED).
16. Reservation of Shares. The Company shall at all times during
the term of the Option reserve and keep available such number of shares of the
class of stock then subject to the Option as will be sufficient to satisfy the
requirements of this Agreement.
17. Limitation of Action. The Employee and the Company each
acknowledges that every right of action accruing to him or it, as the case may
be, and arising out of or in
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<PAGE> 27
connection with this Agreement against the Company or a Parent or Subsidiary, on
the one hand, or against the Employee, on the other hand, shall, irrespective of
the place where an action may be brought, cease and be barred by the expiration
of three years from the date of the act or omission in respect of which such
right of action arises.
18. Notices. Each notice relating to this Agreement shall be
in writing and delivered in person or by certified mail to the proper address.
All notices to the Company or the Committee shall be addressed to them at ENTEX
Holdings, Inc., 6 International Drive, Rye Brook, N.Y. 10573, Attn: Senior Vice
President, Human Resources. All notices to the Employee shall be addressed to
the Employee or such other person or persons at the Employee's address above
specified. Anyone to whom a notice may be given under this Agreement may
designate a new address by notice to that effect.
19. Benefits of Agreement. This Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Company. All
obligations imposed upon the Employee and all rights granted to the Company
under this Agreement shall be binding upon the Employee's heirs, legal
representatives and successors.
20. Severability. In the event that any one or more
provisions of this Agreement shall be deemed to be illegal or unenforceable,
such illegality or unenforceability shall not affect the validity and
enforceability of the remaining legal and enforceable provisions hereof, which
shall be construed as if such illegal or unenforceable provision or provisions
had not been inserted.
21. Governing Law. This Agreement will be construed and
governed in accordance with the laws of the State of New York, without reference
to the conflict of laws principles thereof.
22. Disposition of Shares. By accepting this Agreement, the
Employee agrees that in the event that he shall dispose (whether by sale,
exchange, gift, or any like transfer) of any shares of Common Stock of the
Company (to the extent such shares are deemed to be purchased pursuant to an
incentive stock option) acquired by him pursuant hereto within two years of the
date of grant of this Option or within one year after the acquisition of such
shares pursuant hereto, he will notify the Company no later than 15 days from
the date of such disposition of the date or dates and the number of shares
disposed of by him and the consideration received, if any, and, upon
notification from the Company, promptly forward to the secretary of the Company
any amount requested by the Company for the purpose of satisfying its liability,
if any, to withhold federal, state or local income or earnings tax or any other
applicable tax or assessment (plus interest or penalties thereon, if any, caused
by delay in making such payment) incurred by reason of such disposition.
23. Acknowledgment of Employee. The Employee represents and
agrees that as of the date of grant of this Option, he does not own (within the
meaning of Section 422(b)(6) of the Code) shares possessing more than 10% of the
total combined voting power of all classes of shares of the Company or of any
Parent or Subsidiary.
24. Employment. Nothing contained in this Agreement shall be
construed as (a) a contract of employment between the Employee and the Company
or any Parent or Subsidiary, (b) as a right of the Employee to be continued in
the employ of the Company or any
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<PAGE> 28
Parent or Subsidiary, or (c) as a limitation of the right of the Company or any
Parent or Subsidiary to discharge the Employee at any time, with or without
cause.
25. Definitions. Unless otherwise defined herein, all
capitalized terms shall have the same meanings assigned to them in under the
Plan.
26. Incorporation of Terms of Plan. This agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference.
27. Information Concerning Employee and Terms of Option. This
Agreement incorporates the following terms, definitions and information:
(a) Date of Agreement: ________________
(b) Employee: (FIRST) (LAST)
(c) Address of Employee: (ADDRESS) (APT)
(CITY), (STATE) (ZIP)
(d) Employee's Social Security Number: (SSN)
(e) Date of Grant (Section 1): __________________
(f) Number of Shares of Common Stock subject to Option
(Section 1): (STOCK OP)
(g) Purchase Price of each share of Common Stock covered by Option
(Section 2): $_________
(h) Percentage of Fair Market Value (Section 2) [check applicable
percentage] 100% X 110%___________
(i) Term of Option (Section 4) Five Years
Permitted Additional methods of Exercise of Option (Section 13(c)
[check all that apply]: (i) shares of Common Stock X; (ii)
withholding of shares of Common Stock X; (iii) combination X.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its name by its President or one of its Vice Presidents and the
Employee has hereunto set his hand all as of the date, month and year first
above written.
ENTEX HOLDINGS, INC.
By: /s/ John A. McKenna
----------------------------
John A. McKenna, Jr.
President
-------------------------------
Signature of Employee
(First) (Last)
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<PAGE> 29
EXHIBIT A
INCENTIVE STOCK OPTION EXERCISE FORM
------------------------------------
[DATE]
ENTEX Holdings, Inc.
Six International Drive
Rye Brook, New York 10543
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Incentive Stock Option
Agreement dated [ ], whereby you have granted to the an incentive stock option
to purchase [ ] common shares, par value $0.001 per share, of ENTEX Holdings,
Inc. (the "Company"), I hereby notify you that I elect to exercise my option to
purchase _________ of the shares covered by such option at the exercise price
specified therein. In full payment of the price for the shares being purchased
hereby, I am delivering to you herewith (a) a check payable to the order of the
Company in the amount of $________(1) or (b) a certificate or certificates for
[ ] shares of Common Stock of the Company, and which have a fair market value as
of the datehereof of $________, and a check, payable to the order of the
Company, in the amount of $________.(2) Any such stock certificate or
certificates are endorsed, or accompanied by an appropriate stock power, to the
order of the Company, with my signature guaranteed by a bank or trust company or
by a member firm of the New York Stock Exchange. [I hereby acknowledge that I am
purchasing these shares of Common Stock for investment purposes only and not
with a view to the resale or distribution thereof.]
Very truly yours,
------------------------------------------------
[Address]
(For notices, reports, dividend checks and other
communications to stockholders.)
- ---------------------
(1) $______ of this amount is the purchase price of the shares, and the balance
represents payment of withholding taxes as follows: Federal $________,
State $________ and Local $______________.
(2) $______ of this amount is at least equal to the current market value of one
share of Common Stock of the Company, and the balance represents payment of
withholding taxes as follows: Federal $_______ State $________ and Local
$________.
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<PAGE> 30
EXHIBIT B
RESTRICTIONS
-----------
The restrictions set forth below (other than the restrictions
contained in paragraph 1, winch shall survive indefinitely) shall apply to all
shares purchased pursuant to this Agreement until the completion by the Company
of a Public Offering:
1. If the employment of the Employee is terminated for Good
Cause, then the Company shall have the right, but not the obligation, to
purchase from such Employee all shares of Common Stock acquired pursuant to this
Agreement for a purchase price equal to the exercise price of the Options
pursuant to which such shares were purchased. The Company shall exercise such
right by delivery of a written notice of exercise to such Employee not later
than sixty (60) days after the date on which the employment of such Employee
terminated (the "Termination Date").
2. If the employment of the Employee is terminated other than by
reason of Disability or Good Cause, then the Company shall have the right, but
not the obligation, to purchase from the Employee or the Employee's legal
representative (or beneficiary) all shares previously acquired pursuant to this
Agreement, including shares acquired pursuant to this Agreement following the
Employee's death for a purchase price equal to the total Fair Market Value of
such shares of Common Stock in effect on the Termination Date. The Company shall
exercise such right by delivery of a written notice of exercise to the Employee
or his legal representative (or beneficiary) not later than sixty (60) days
after the later of the Termination Date or the date of the exercise by the
Optionee's legal representative of an option pursuant to Section 7(a) of the
Agreement, whichever is applicable.
3. If the employment of the Employee is terminated by reason of
Disability, then the Company shall have the right, but not the obligation, to
purchase only such shares that have been acquired pursuant to this Agreement and
that have been held one (1) year or longer by the Employee for a purchase price
equal to the total Fair Market Value of such share in effect on the Termination
Date. The Company shall exercise such right by delivery of a written notice of
exercise to the Employee not later than sixty (60) days after the Termination
Date.
4. The Company shall have the right, but not the obligation, to
purchase shares acquired by the Employee prior to the Termination Date and not
acquired by the Company pursuant to paragraph 3 or acquired by the Employee
pursuant to Section 7(b) of the Agreement for a purchase price equal to the
total Fair Market Value of such shares of Common Stock, in effect on the
Termination Date. The Company shall exercise such right by delivery of a written
notice of exercise to the Employee at any time during the period beginning on
the date which is one (1) year after the date of exercise by the Employee and
ending sixty (60) days thereafter.
<PAGE> 31
5. (a) If the Employee desires to sell, assign, encumber, pledge
or otherwise transfer ("Transfer") any shares of Common Stock acquired pursuant
to this Agreement to any person or entity other than the Company ("Third
Party"), except pursuant to a Transfer by the Employee of all or a portion of
such shares to his ancestors, descendants or spouse (other than as an incident
to the dissolution of marriage) (collectively, "Family Donees"), or to one or
more trusts for the benefit of the Employee or any of his Family Donees, either
inter vivos, or, subject to the provisions hereof ----- ----- relating to the
death or Disability of the Employee, pursuant to applicable laws of descent and
distribution, if such Family Donee or such trust agrees in writing to be bound
by the terms of the restrictions contained in this Agreement, such Transfer
shall be made only in accordance with this Agreement and only for cash or cash
equivalents.
(b) Upon receipt by the Employee of any bona fide offer to
purchase all or any portion of the shares of Common Stock owned by such
Employee, his family Donees or trusts for his or their benefit, then the party
proposing to make the Transfer (the "Offering Party") shall deliver written
notice ("Offer Notice") to the Company specifying the name of the Third Party
that is the proposed purchaser of the shares of Common Stock, the number of
shares proposed to be transferred, the price to be paid in the proposed sale and
all other material conditions of the proposed sale. The Offering Party shall
notify the Company of any material changes in the terms of such proposed
Transfer, and such notice shall be treated as an original Offer Notice,
(c) The Company shall have the right, but not the obligation, to
purchase all or any part of the shares of Common Stock offered pursuant to the
Offer Notice for the price and on the terms specified in the Offer Notice by
delivery of a written notice of exercise within sixty (60) days after the
receipt of the Offer Notice.
6. If the Company is unable to exercise the rights granted to it
pursuant to paragraphs 1 through 5 above due to a restriction imposed upon the
Company under the terms of any bank loan or the terms of any instrument or
agreement evidencing any indebtedness or other obligation of the Company or
under an applicable provision of the Delaware General Corporation Law, then the
Company will offer to assign its rights to Cameron by delivery of written notice
of such offer. Cameron shall have the right, but not the obligation, to assign
his rights hereunder to one or more Cameron Affiliates. Cameron and/or the
Cameron Affiliates may exercise the rights of the Company to purchase shares of
Common Stock and/or Options assigned pursuant to this paragraph 6 by delivery of
a written notice of exercise to the Company and the Employee not later than
fifteen (15) days after delivery by the Company of its offer notice to Cameron.
If Cameron and/or the Cameron Affiliates exercise such rights, then Cameron
and/or the Cameron Affiliates shall purchase such shares of Common Stock and/or
Options from the Employee and/or his legal representative on the same terms and
subject to the same conditions as are applicable to the Company under this
Agreement. If Cameron and/or the Cameron Affiliates do not exercise their rights
under this paragraph 6, then the rights and obligations of the Company under
paragraphs 1 through 5 above shall be deemed to have been satisfied.
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<PAGE> 32
7. The closing of any purchase pursuant to the exercise of any of
the foregoing rights shall occur not later than thirty (30) days after the
delivery of the notice of exercise by the Company, Cameron or the Cameron
Affiliates, as the case may be, at the principal executive offices of the
Company, unless the purchaser otherwise agrees, and at a time agreed upon by the
Employee or his legal representative and the purchaser. At such closing, the
purchaser shall pay to the Employee or his legal representative or the Offering
Party, as the case may be, the total purchase price for the shares being
purchased by check, payable to the order of the Employee or his legal
representative or the Offering Party, as the case may be, against delivery by
the Employee or his legal representative or the Offering Party, as the case may
be, of a certificate or certificates representing all of the shares being
purchased, together with a stock power duly executed in blank with signature
guaranteed, free and clear of all liens, claims, charges and encumbrances.
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<PAGE> 33
OPTION NO. 96-NQO-[ ]
================================================================================
ENTEX HOLDINGS, INC.
1996 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION
GRANTED TO
NAME
OPTIONEE
- ---------------- ----------------------------
Number of Shares Price per Share (Fair Market
Value on Date of Grant)
DATE GRANTED: EXPIRATION DATE:
------------- -------------
================================================================================
<PAGE> 34
NON-QUALIFIED STOCK OPTION AGREEMENT
AGREEMENT made as of the date set forth in Section 24 hereof
between ENTEX Holdings, Inc., a Delaware corporation (hereinafter referred to as
the "Company"), and the [Participant] named in Section 24 hereof, residing at
the address set forth in Section 24 hereof (hereinafter referred to as the
"[Participant]").
W I T N E S S E T H:
WHEREAS, the Company desires, in connection with the service of
the [Participant] and in accordance with its 1996 Stock Option Plan, as Amended
and Restated June 21, 1996 (the "Plan"), to provide the [Participant] with an
opportunity to acquire Common Stock, par value $0.001 per share (hereinafter
referred to as "Common Stock"), in order to link the personal interests of the
[Participant] to those of the stockholders, customers and [Participant] of the
Company and its subsidiaries, by providing an incentive for outstanding
performance;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein set forth and other good and valuable consideration, the
Company and the [Participant] hereby agree as follows:
1. Confirmation of Grant of Option. Pursuant to a determination
by the Stock Option Committee of the Board of Directors of the Company
authorized to administer the Plan, made on the date of grant set forth in
Section 24 hereof (the "Date of Grant") the Company, subject to the terms of the
Plan and this Agreement, hereby confirms that the [Participant] has been granted
the right to purchase (hereinafter referred to as the "Option") an aggregate
number of shares of Common Stock set forth in Section 24 hereof, subject to
adjustment as provided in Section 9 hereof (such shares, as adjusted, shall
hereinafter be referred to as the "Shares"). The Option is NOT intended to
qualify as an incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of shares of Common Stock
covered by the Option will be the cash amount per share set forth in Section 24
hereof, being not less than 100% of the Fair Market Value of a share of Common
Stock on the Date of Grant, subject to adjustment as provided in Section 9
hereof.
3. Exercise of Option. The Option shall become vested and
exercisable on the terms and conditions hereinafter set forth:
(a) The Option shall become vested and nonforfeitable
cumulatively as to the following amounts of the number of Shares originally
subject thereto (after giving effect to any adjustment pursuant to Section 9
hereof), on the dates indicated:
(i) as to one-third of the Shares, on and after the date which
is one (1) year after the Date of Grant;
(ii) as to an additional one-third of the shares, on and after
the date which is two (2) years after the Date of Grant; and
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<PAGE> 35
(iii) as to the remaining Shares, on and after the date which
is three (3) years after the Date of Grant.
(b) This Option, to the extent vested and nonforfeitable
pursuant to the provisions of Section 3(a) hereof, shall become exercisable as
of the later of:
(i) the date or dates it becomes so vested and nonforfeitable;
or
(ii) the earlier of (A) January 1, 1999, or (B) if Company
completes a Public Offering prior to January 1, 1999, the date which is
180 days after the date of the consummation of the Public Offering, but
in no event earlier than January 1, 1998.
(c) The Option may be exercised pursuant to the provisions of
this Section 3, by notice and payment to the Company as provided in Sections 12
and 17 hereof.
4. Term of Option. The term of the Option shall be the period
after the Date of Grant set forth in Section 24 hereof, subject to earlier
termination or cancellation as provided in this Agreement. This Option, to the
extent unexercised, shall expire at the end of the period set forth in the
immediately preceding sentence. The holder of the Option shall not have any
rights to dividends or any other rights of a stockholder with respect to any
shares of Common Stock subject to the Option until such shares shall have been
issued to him (as evidenced by the appropriate entry on the books of a duly
authorized transfer agent of the Company) provided that the date of issuance
shall not be earlier than the Closing Date (as hereinafter defined with respect
to such shares pursuant to Section 12 hereof) upon purchase of such shares upon
exercise of the Option.
5. Non-transferability of Option. The Option shall not be
transferable otherwise than by will or by the laws of descent and distribution
or pursuant to a domestic relations order, and the Option may be exercised
during the lifetime of the [Participant] only by him. More particularly, but
without limiting the generality of the foregoing, the Option may not be
assigned, transferred (except as provided in the next preceding sentence) or
otherwise disposed of, or pledged or hypothecated in any way, and shall not be
subject to execution, attachment or other process. Any assignment, transfer,
pledge, hypothecation or other disposition of the Option attempted contrary to
the provisions of this Agreement, or any levy of execution, attachment or other
process attempted upon the Option, will be null and void and without effect. Any
attempt to make any such assignment, transfer, pledge, hypothecation or other
disposition of the Option or any attempt to make any such levy of execution,
attachment or other process will cause the Option to terminate immediately upon
the happening of any such event; provided, however, that any such termination of
the Option under the foregoing provisions of this Section 5 will not prejudice
any rights or remedies which the Company or any Parent or Subsidiary may have
under this Agreement or otherwise.
6. Exercise Upon Termination of Service Relationship. If the
[Participant] at any time ceases to be [an employee] [an officer] [a member of
the Board of Directors] of the Company by reason of his discharge for Good
Cause, the Option shall forthwith terminate and the [Participant] shall forfeit
all rights hereunder. If, however, the [Participant] for any other reason (other
than Disability or death) ceases to be [an employee] [an officer] [a member of
the Board of Directors] of the Company, the Option may, subject to the
provisions of Section 5 hereof, be
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<PAGE> 36
exercised by the [Participant] to the same extent the [Participant] would have
been entitled under Section 3 hereof to exercise the Option on the day
immediately before the date of such termination of service, at any time within
one (1) year after such termination of service, at the end of which period the
Option to the extent the Option is not then exercised, shall terminate and the
[Participant] shall forfeit all rights hereunder. In no event, however, may the
Option be exercised after the expiration of the term provided in Section 4
hereof.
7. Exercise Upon Death or Disability. (a) If the [Participant]
dies while he is [an employee] [an officer] [a member of the Board of Directors]
of the Company, the Option may, notwithstanding Section 3 hereof, be exercised
with respect to all or any part of the shares of Common Stock as to which the
deceased [Participant] had not exercised the Option at the time of his death, by
the estate of the [Participant] (or by the person or persons who acquire the
right to exercise the Option by written designation of the [Participant]) at any
time within the period ending three (3) years after the death of the
[Participant], at the end of which period the Option, to the extent not then
exercised, shall terminate and the estate or other beneficiaries shall forfeit
all rights hereunder. In no event, however, may the Option be exercised after
the expiration of the term provided in Section 4 hereof.
(b) In the event that the [Participant] ceases to be [an
employee] [an officer] [a member of the Board of Directors] of the Company by
reason of the Disability of the [Participant], the Option may, notwithstanding
Section 3 hereof, be exercised with respect to all or any part of the shares of
Common Stock as to which he had not exercised the Option at the time of his
termination due to Disability by the [Participant], at any time within the
period ending three (3) years after the date of such termination of service, at
the end of which period the Option, to the extent not then exercised, shall
terminate and the [Participant] shall forfeit all rights hereunder. In no event,
however, may the Option be exercised after the expiration of the term provided
in Section 4 hereof.
8. Special Rules Regarding Exercisability of the Option. (a) Each
time the [Participant] elects to exercise his rights to purchase shares of
Common Stock pursuant to the terms of this Option, such exercise may be for no
fewer than one hundred (100) shares of Common Stock; provided, however, that if
this Option is exercisable in whole for fewer than one hundred (100) shares,
such Option may nevertheless be exercised, but may be exercised in whole only.
(b) If the [Participant] ceases to be [an employee] [an officer] [a
member of the Board of Directors] of the Company for any reason other than
death, Disability or Good Cause, on and after the date he has a vested interest
in a portion or all of the Option granted under this Agreement, but prior to the
date this Option is first exercisable, the Option to purchase shares of Common
Stock hereunder shall be canceled in its entirety and, in consideration
therefor, the [Participant] shall be paid an amount in cash equal to the product
of (i) the number of shares of Common Stock for which the Option granted
hereunder is exercisable on the date of such termination of service, multiplied
by (ii) an amount in cash equal to the excess (if any) of the Fair Market Value
of one share of Common Stock in effect on such date over the exercise price set
forth herein for the purchase of one share of Common Stock. Such payment shall
be made not later than sixty (60) days after the date on which the [Participant]
ceases to be [an employee] [an officer] [a member of the Board of Directors] of
the Company. If the Company is unable to pay the amount required to be paid to
the [Participant] pursuant to this Section 8(b) due to a restriction imposed
upon it under the terms of any bank loan or the terms of any instrument or
agreement evidencing any indebtedness or other obligation of the Company or
under the Delaware
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<PAGE> 37
General Corporation Law, then the obligation of the Company under this Section
8(b) shall be deferred until the Corporation is legally permitted to make the
payment required under this Section 8(b).
9. Adjustments. In the event there is any change in the Common
Stock of the Company by reason of any reorganization, recapitalization, stock
split, stock dividend or otherwise, there shall be substituted for or added to
each share of Common Stock theretofore appropriated or thereafter subject, or
which may become subject, to this Option the number and kind of shares of stock
or other securities into which each outstanding share of Common Stock shall be
so changed or for which each such share shall be exchanged, or to which each
such share be entitled, as the case may be, and the per share price thereof also
shall be appropriately adjusted.
10. Merger or Consolidation, Etc. of the Company. Upon (a) the
merger or consolidation of the Company with or into another corporation
(pursuant to which the stockholders of the Company immediately prior to such
merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in the voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's then outstanding securities), if
the agreement of merger or consolidation does not provide for (i) the
continuance of this Option, or (ii) the substitution of new option(s) for this
Option, or for the assumption of such Option by the surviving corporation, (b)
the dissolution, liquidation, or sale of substantially all the assets, of the
Company or (c) a Change in Control of the Company, then if and to the extent
that the Company so determines, in its discretion and as provided in the Plan,
the [Participant] shall have the right immediately prior to the effective date
of such merger, consolidation, dissolution, liquidation, or sale of assets, or
automatically upon a Change in Control of the Company, to exercise this Option
(to the extent not exercised and not otherwise expired or terminated) in whole
or in part without regard to any installment provision that may have been made
part of the terms and conditions of this Option. The Company, to the extent
practicable, shall give advance notice to the [Participant] of such merger,
consolidation, dissolution, liquidation, sale of assets or Change in Control of
the Company. To the extent that the Company makes such a determination in
accordance with this Section 10 and this Option is not so exercised, it shall be
forfeited as of the effective time of any merger, consolidation, dissolution,
liquidation or sale of assets (but not in the case of a Change in Control of the
Company).
11. Registration. If the issuance of shares of Common Stock
subject hereto upon the exercise hereof has not been registered under the
Securities Act of 1933, as amended, then, upon the request of the Company, the
Director will give a representation as to his investment intent with respect to
such shares prior to their issuance pursuant to Section 12 hereof. The Company
may register or qualify the shares covered by the Option for sale pursuant to
the Securities Act of 1933, as amended, at any time prior to or after the
exercise in whole or in part of the Option.
12. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by the delivery of
a written notice of exercise (substantially in the form of Exhibit A hereto) and
payment to the Company in accordance with the procedure prescribed herein. Each
such notice shall:
(i) state the election to exercise the Option and the number
of Shares in respect of which it is being exercised;
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<PAGE> 38
(ii) contain a representation and agreement as to investment
intent, if required by counsel to the Company with respect to such
Shares, in form satisfactory to counsel for the Company;
(iii) be signed by the [Participant] or the person or persons
entitled to exercise the Option and, if the Option is being exercised by
any person or persons other than the [Participant], be accompanied by
proof, satisfactory to counsel for the Company, of the right of such
person or persons to exercise the Option; and
(iv) be received by the Company on or before the date of the
expiration of this Option. In the event the date of expiration of this
Option falls on a day which is not a regular business day at the
Company's executive office in Rye Brook, New York then such written
notice must be received at such office on or before the last regular
business day prior to such date of expiration.
(b) Upon receipt of such notice, the Company shall specify, by
written notice to the [Participant] or to the person or persons exercising the
Option, a date and time (such date and time being herein called the "Closing
Date") and place for payment of the full purchase price of such Shares. The
Closing Date shall not be more than thirty (30) days after the date the notice
of exercise is received by the Company unless another date is agreed upon by the
Company and the [Participant] or the person or persons exercising the Option or
is required upon advice of counsel for the Company in order to meet the
requirements of Section 13 hereof.
(c) Payment of the purchase price of any shares of Common
Stock, in respect of which the Option shall be exercised, shall be made by the
[Participant] or such person or persons at the place specified by the Company on
or before the Closing Date by delivering to the Company (i) a check payable to
the order of the Company, or unless otherwise provided in Section 24 hereof,
(ii) properly endorsed certificates of shares of Common Stock (or certificates
accompanied by an appropriate stock power) with signature guaranteed by a bank
or trust company or New York Stock Exchange member firm representing shares of
Common Stock having a Fair Market Value equal to the aggregate exercise price of
the shares being acquired pursuant to this Option, it being understood and
agreed that if this Option is not exercised in whole, the [Participant] shall be
permitted to deliver shares previously acquired pursuant to prior exercises of
this Option in payment of the exercise price upon a subsequent exercise of this
Option, except that fractional shares shall be paid for in cash, (iii) to have
withheld from the total number of shares of Common Stock to be acquired upon the
exercise of an Option that number of shares having a Fair Market Value equal to
the aggregate exercise price of the shares being acquired pursuant to this
Option, except that fractional shares shall be paid for in cash, or (iv) any
combination of the foregoing.
(d) The Option shall be deemed to have been exercised with
respect to any particular shares of Common Stock if, and only if, the preceding
provisions of this Section 12 and the provisions of Section 13 hereof shall have
been complied with, in which event the Option shall be deemed to have been
exercised on the date the notice of exercise of the Option was received by the
Company. Anything in this Agreement to the contrary notwithstanding, any notice
of exercise given pursuant to the provisions of this Section 12 shall be void
and of no effect if all
-5-
<PAGE> 39
the preceding provisions of this Section 12 and the provisions of Section 13
shall not have been complied with.
(e) The certificate or certificates for shares of Common Stock
as to which the Option shall be exercised will be registered in the name of the
Director (or in the name of the [Participant's] estate or other beneficiary if
the Option is exercised after the [Participant's] death), or if the Option is
exercised by the [Participant] and if the [Participant] so requests in the
notice exercising the Option, will be registered in the name of the
[Participant] and another person jointly, with right of survivorship and will be
delivered on the Closing Date to the Director at the place specified for the
closing, but only upon compliance with all of the provisions of this Agreement.
(f) If the [Participant] fails to accept delivery of and pay
for all or any part of the number of Shares specified in such notice upon tender
or delivery thereof on the Closing Date, his right to exercise the Option with
respect to such undelivered Shares may be terminated in the sole discretion of
the Board of Directors of the Company. The Option may be exercised only with
respect to full Shares.
(g) The Company shall not be required to issue or deliver any
certificate or certificates for shares of its Common Stock purchased upon the
exercise of any part of this Option prior to the payment to the Company, upon
its demand, of any amount requested by the Company for the purpose of satisfying
its liability, if any, to withhold state or local income or earnings tax or any
other applicable tax or assessment (plus interest or penalties thereon, if any,
caused by a delay in making such payment) incurred by reason of the exercise of
this Option or the transfer of shares thereupon. Such payment shall be made by
the [Participant] in cash or, with the consent of the Company, by tendering to
the Company shares of Common Stock equal in value to the amount of the required
withholding. In the alternative, the Company may, at its option, satisfy such
withholding requirements by withholding from the shares of Common Stock to be
delivered to the [Participant] pursuant to an exercise of this Option a number
of shares of Common Stock equal in value to the amount of the required
withholding.
13. Approval of Counsel. The exercise of the Option and the
issuance and delivery of shares of Common Stock pursuant thereto shall be
subject to approval by the Company's counsel of all legal matters in connection
therewith, including compliance with the requirements of the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder, and the requirements of any stock exchange
upon which the Common Stock may then be listed.
14. Resale of Common Stock. (a) If so requested by the Company,
upon any sale or transfer of the Common Stock purchased upon exercise of the
Option, the [Participant] shall deliver to the Company an opinion of counsel
satisfactory to the Company to the effect that either (i) the Common Stock to be
sold or transferred has been registered under the Securities Act of 1933, as
amended, and that there is in effect a current prospectus meeting the
requirements of Section 10(a) of said Act which is being or will be delivered to
the purchaser or transferee at or prior to the time of delivery of the
certificates evidencing the Common Stock to be sold or transferred, or (ii) such
Common Stock may then be sold without violating Section 5 of said Act.
-6-
<PAGE> 40
(b) The Common Stock issued upon exercise of the Option shall
be subject to the restrictions set forth in Exhibit B hereto and shall bear the
following legend if required by the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN A STOCK
OPTION AGREEMENT BY AND BETWEEN THE HOLDER HEREOF AND
ENTEX HOLDINGS, INC. AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL (I)
ALL OF SUCH RESTRICTIONS HAVE EXPIRED OR HAVE BEEN WAIVED
BY ENTEX HOLDINGS, INC. AND (II) SUCH SHARES HAVE FIRST
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (UNLESS, IN THE OPINION OF COUNSEL FOR ENTEX
HOLDINGS, INC., SUCH REGISTRATION IS NOT REQUIRED).
15. Reservation of Shares. The Company shall at all times during
the term of the Option reserve and keep available such number of shares of the
class of stock then subject to the Option as will be sufficient to satisfy the
requirements of this Agreement.
16. Limitation of Action. The [Participant] and the Company each
acknowledges that every right of action accruing to him or it, as the case may
be, and arising out of or in connection with this Agreement against the Company
or a Parent or Subsidiary, on the one hand, or against the [Participant], on the
other hand, shall, irrespective of the place where an action may be brought,
cease and be barred by the expiration of three years from the date of the act or
omission in respect of which such right of action arises.
17. Notices. Each notice relating to this Agreement shall be in
writing and delivered in person or by certified mail to the proper address. All
notices to the Company or the Committee shall be addressed to them at ENTEX
Holdings, Inc., 6 International Drive, Rye Brook, N.Y. 10573, Attn..: Senior
Vice President, Human Resources. All notices to the [Participant] shall be
addressed to the [Participant] or such other person or persons at the
[Participant's] address above specified. Anyone to whom a notice may be given
under this Agreement may designate a new address by notice to that effect.
18. Benefits of Agreement. This Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Company. All
obligations imposed upon the [Participant] and all rights granted to the Company
under this Agreement shall be binding upon the [Participant's] heirs, legal
representatives and successors.
19. Severability. In the event that any one or more provisions of
this Agreement shall be deemed to be illegal or unenforceable, such illegality
or unenforceability shall not affect the validity and enforceability of the
remaining legal and enforceable provisions hereof, which shall be construed as
if such illegal or unenforceable provision or provisions had not been inserted.
20. Governing Law. This Agreement will be construed and governed
in accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
-7-
<PAGE> 41
21. No Other Rights Created. Nothing contained in this Agreement
shall be deemed to create a requirement of continued service as a director or a
right of the [Participant] to be continued as a director. The [Participant]
shall remain subject to removal or termination of his status as [an employee]
[an officer] [a director] to the same extent as though this Agreement did not
exist.
22. Definitions. Unless otherwise defined herein, all capitalized
terms used herein shall have the same meanings assigned to them in the Plan.
23. Incorporation of Terms of Plan. This Agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference.
- 8 -
<PAGE> 42
24. Information Concerning the [Participant] and Terms of
Option. This Agreement incorporates the following terms, definitions and
information:
(a) Date of Agreement:
(b) [Participant]
(c) Address of [Participant]: ____________________________
______________________________________________________
(d) [Participant's] Social Security Number: ______________
(e) Date of Grant (Section 1):
(f) Number of Shares of Common Stock Subject to Option
(Section 1):
(g) Purchase Price of each share of Common Stock
covered by Option (Section 2):
(h) Term of Option (Section 4):
(i) Permitted Additional Methods of Exercise of Option
(Section 12(c)) [check all that apply]: (i) shares of
Common Stock [ ]; (ii) withholding of shares of
Common Stock [ ]; (iii) combination [ ].
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed in its name by its President or one of its Vice
Presidents and the [Participant] has hereunto set his hand all as of the date,
month and year first above written.
ENTEX HOLDINGS, INC.
By:
---------------------------------------
Name:
Title:
------------------------------------------
Signature of [Participant]
- 9 -
<PAGE> 43
EXHIBIT A
NON-QUALIFIED STOCK OPTION EXERCISE FORM
[DATE]
ENTEX Holdings, Inc.
Six International Drive
Rye Brook, New York 10573
Attention: [Secretary]
Dear Sirs:
Pursuant to the provisions of the Non-Qualified Stock Option
Agreement dated [_______], whereby you have granted to me a non-qualified stock
option to purchase [ ] common shares, par value $0.001 per share, of ENTEX
Holdings, Inc. (the "Company"), I hereby notify you that I elect to exercise my
option to purchase ____________________ of the shares covered by such option at
the exercise price specified therein. In full payment of the price for the
shares being purchased hereby, I am delivering to you herewith (a) a check
payable to the order of the Company in the amount of $_____________, or (b) a
certificate or certificates for [ ] shares of Common Stock of the Company, and
which have a fair market value as of the date hereof of $_____________, and a
check, payable to the order of the Company, in the amount of $_____________. Any
such stock certificate or certificates are endorsed, or accompanied by an
appropriate stock power, to the order of the Company, with my signature
guaranteed by a bank or trust company or by a member firm of the New York Stock
Exchange. [I hereby acknowledge that I am purchasing these shares of Common
Stock for investment purposes only and not with a view to the resale or
distribution thereof.]
Very truly yours,
---------------------------
[Address]
(For notices, reports,
dividend checks and other
communications to
stockholders.)
<PAGE> 44
EXHIBIT B
RESTRICTIONS
The restrictions set forth below (other than the restriction contained in
paragraph 1, which shall continue indefinitely) shall apply to all shares
purchased pursuant to this Agreement until the completion by the Company of a
Public Offering:
1. If the [Participant] ceases to be [an employee] [an officer]
[a member of the Board of Directors] of the Company other than for Good Cause,
then the Company shall have the right, but not the obligation, to purchase from
such [Participant] all shares of Common Stock acquired pursuant to this
Agreement for a purchase price equal to the exercise price of the Option
pursuant to which such shares were purchased. The Company shall exercise such
right by delivery of a written notice of exercise to such [Participant] not
later than sixty (60) days after the date on which the [Participant] ceases to
be a member of the Board of Directors of the Company (the "Termination Date").
2. If the [Participant] ceases to be [an employee] [an officer]
[a member of the Board of Directors] of the Company other than by reason of
death, Disability or Good Cause, then the Company shall have the right, but not
the obligation, to purchase from such [Participant] all shares of Common Stock
acquired pursuant to this Agreement for a purchase price equal to the Fair
Market Value of such shares in effect on the later of the Termination Date or
the date on which such shares are acquired pursuant to an exercise of the
Option. The Company shall exercise such right by delivery of a written notice of
exercise to such [Participant] not later than sixty (60) days after the date as
of which the Fair Market Value repurchase price is to be determined.
3. If the [Participant] ceases to be [an employee] [an officer]
[a member of the Board of Directors] of the Company due to death or Disability,
then the Company shall have the right, but not the obligation, to purchase all
shares of Common Stock acquired by the [Participant] or his legal representative
(or his beneficiary) pursuant to this Agreement at a purchase price equal to the
Fair Market Value of such shares in effect on the later of the Termination Date
or the date on which such shares are acquired pursuant to an exercise of the
Option. The Company shall exercise such right by delivery to the [Participant]
or his legal representative (or his beneficiary) of a written notice of exercise
not later than sixty (60) days after the date as of which the Fair Market Value
repurchase price is to be determined.
4. (a) If the [Participant] desires to sell, assign, encumber,
pledge or otherwise transfer ("Transfer") any shares of Common Stock acquired
pursuant to this Agreement to any person or entity other than the Company
("Third Party"), except pursuant to a Transfer by the [Participant] of all or a
portion of such shares to his ancestors, descendants or spouse (other than as an
incident to the dissolution of marriage) (collectively, "Family Donees"), or to
one or more trusts for the benefit of the [Participant] or any of his Family
Donees, either inter vivos, or, subject to the provisions hereof relating to the
death or Disability of the [Participant], pursuant to applicable laws of descent
and distribution, if such Family Donee or such trust agrees in writing to be
bound by the terms of the restrictions contained in this Agreement, such
Transfer shall be made only in accordance with this Agreement and only for cash
or cash equivalents.
<PAGE> 45
(b) Upon receipt by the [Participant] of any bona fide offer
to purchase all or any portion of the shares of Common Stock owned by such
[Participant], his Family Donees or trusts for his or their benefit, then the
party proposing to make the Transfer (the "Offering Party") shall deliver
written notice ("Offer Notice") to the Company specifying the name of the Third
Party that is the proposed purchaser of the shares of Common Stock, the number
of shares proposed to be transferred, the price to be paid in the proposed sale
and all other material conditions of the proposed sale. The Offering Party shall
notify the Company of any material changes in the terms of such proposed
Transfer, and such notice shall be treated as an original Offer Notice.
(c) The Company shall have the right, but not the obligation,
to purchase all or any part of the shares of Common Stock offered pursuant to
the Offer Notice for the price and on the terms specified in the Offer Notice by
delivery of a written notice of exercise within sixty (60) days after the
receipt of the Offer Notice.
5. If the Company is unable to exercise the rights granted to
it pursuant to paragraphs 1 through 4 above due to a restriction imposed upon
the Company under the terms of any bank loan or the terms of any instrument or
agreement evidencing any indebtedness or other obligation of the Company or
under an applicable provision of the Delaware General Corporation Law, then the
Company will offer to assign its rights to Cameron by delivery of written notice
of such offer. Cameron shall have the right, but not the obligation, to assign
his rights hereunder to one or more Cameron Affiliates. Cameron and/or the
Cameron Affiliates may exercise the rights of the Company to purchase shares of
Common Stock assigned pursuant to this paragraph 5 by delivery of a written
notice of exercise to the Company and the [Participant] not later than fifteen
(15) days after delivery by the Company of its offer notice to Cameron. If
Cameron and/or the Cameron Affiliates exercise such rights, then Cameron and/or
the Cameron Affiliates shall purchase such shares of Common Stock from the
[Participant] and/or his legal representative on the same terms and subject to
the same conditions as are applicable to the Company under this Agreement. If
Cameron and/or the Cameron Affiliates do not exercise their rights under this
paragraph 5, then the rights and obligations of the Company under paragraphs 1
through 4 above shall be deemed to have been satisfied.
6. The closing of any purchase pursuant to the exercise of any
of the foregoing rights shall occur not later than thirty (30) days after the
delivery of the notice of exercise by the Company, Cameron or the Cameron
Affiliates, as the case may be, at the principal executive offices of the
Company, unless the purchaser otherwise agrees, and at a time agreed upon by the
Director or his legal representative or the Offering Party, as the case may be
and the purchaser. At such closing, the purchaser shall pay to the [Participant]
or his legal representative the total purchase price for the shares being
purchased by check, payable to the order of the [Participant] or his legal
representative or the Offering Party, as the case may be, against delivery by
the [Participant] or his legal representative or the Offering Party, as the case
may be of a certificate or certificates representing all of the shares being
purchased, together with a stock power duly executed in blank with signature
guaranteed, free and clear of all liens, claims, charges and encumbrances.
- 2 -
<
<PAGE> 1
Exhibit 10.9
ENTEX INFORMATION SERVICES, INC.
1996 STOCK OPTION PLAN
---------------
AS ADOPTED JULY 8, 1996
<PAGE> 2
ENTEX INFORMATION SERVICES, INC.
1996 STOCK OPTION PLAN
INTRODUCTION
ENTEX Information Services, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), hereby establishes an incentive
compensation plan to be known as the "ENTEX 1996 Stock Option Plan" (hereinafter
referred to as the "Plan"), as set forth in this document. The Plan permits the
grant of Non-Qualified Stock Options and Incentive Stock Options.
The Plan shall become effective on July 8, 1996. However, it shall
be rendered null and void and have no effect, and all Plan Awards granted
hereunder shall be canceled, if the Plan is not approved by the affirmative vote
of the holders of a majority of the Corporation's issued and outstanding Common
Stock within twelve (12) months of such date.
The purpose of the Plan is to promote the success and enhance the
value of the Corporation by linking the personal interests of Participants to
those of the Corporation's stockholders, customers and employees, by providing
Participants with an incentive for outstanding performance. The Plan is further
intended to provide flexibility to the Corporation in its ability to motivate,
and retain the services of, Participants upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
<PAGE> 3
DEFINITIONS
For purposes of this Plan, the following terms shall be defined as
follows unless the context clearly indicates otherwise:
A. "Affiliate" shall have the meaning ascribed to it in Rule 12b-2
under the Exchange Act.
B. "Associate" shall have the meaning ascribed to it in Rule 12b-2
under the Exchange Act.
C. "Cameron" shall mean Dort A. Cameron III.
D. "Cameron Affiliates" shall mean persons or entities that are
Affiliates of Cameron.
E. "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
F. "Committee" shall mean the Stock Option Committee of the Board of
Directors of the Corporation.
G. "Common Stock" shall mean the common stock, par value $0.001 per
share, of the Corporation.
H. "Corporation" shall mean ENTEX Information Services, Inc., a
Delaware corporation, and each successor corporation thereto which continues the
Plan.
I. "Disability" shall have the same meaning as the term "permanent
and total disability" under Section 22(e)(3) of the Code.
J. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
K. "Fair Market Value" of the Corporation's Common Stock shall mean
the fair market value of the Common Stock determined by the Committee from time
to time in good faith, it being understood that such fair market value shall be
determined periodically, and shall not be required to be determined with
reference to any particular Options or any particular Participant. If the
Corporation's common stock is publicly traded, then the Fair Market Value of the
Corporation's Common Stock on a Trading Day shall mean the last reported sale
price for Common Stock or, in case no such reported sale takes place on such
Trading Day, the average of the closing bid and asked prices for the Common
Stock for such Trading Day, in either case on the principal securities exchange
on which the Common Stock is listed or admitted to trading, or if the Common
Stock is not listed or admitted to trading on any securities exchange, but is
traded in the over-the-counter market, the closing sale price of the Common
Stock or, if no sale is publicly reported, the average of the closing bid and
asked quotations for the Common Stock, as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") or any comparable
system or, if the Common Stock is not listed on NASDAQ or a comparable system,
the closing sale price of the Common Stock or, if no sale is publicly reported,
the average of the closing bid and asked prices, as furnished by two members of
- 2 -
<PAGE> 4
the National Association of Securities Dealers, Inc. who make a market in the
Common Stock selected from time to time by the Corporation for that purpose. In
addition, for purposes of this definition, a "Trading Day" shall mean, if the
Common Stock is listed on any securities exchange, a business day during which
such exchange was open for trading and at least one trade of Common Stock was
effected on such exchange on such business day, or, if the Common Stock is not
listed on any national securities exchange but is traded in the over-the-counter
market, a business day during which the over-the-counter market was open for
trading and at least one "eligible dealer" quoted both a bid and asked price for
the Common Stock. An "eligible dealer" for any day shall include any
broker-dealer who quoted both a bid and asked price for such day, but shall not
include any broker-dealer who quoted only a bid or only an asked price for such
day.
L. "Good Cause" shall mean (i) the willful failure by such
Participant to perform his duties as an employee, director, consultant or other
service provider of the Corporation (other than a failure resulting from
physical or mental disability), it being understood that no act, or failure to
act, by a Participant shall be considered "willful" unless the Board of
Directors of the Corporation in the reasonable exercise of its business judgment
determines that such act or failure to act was committed without good faith and
without a reasonable belief that such act or failure to act was in the best
interests of the Company, (ii) such participant engaging in gross misconduct
injurious to the Corporation, (iii) the material breach by such Participant of
any Employment Agreement or other service agreement between the Corporation or
any Affiliate of the Corporation and such Participant or (iv) the conviction or
admission of guilt in a court of law of any crime that constitutes a felony in
the jurisdiction involved.
M. "Incentive Stock Option" shall mean a stock option satisfying the
requirements for tax-favored treatment under Section 422 of the Code.
N. "Initial Public Offering" shall mean the offering by the
Corporation in any jurisdiction of its securities to the general public with the
result that the Corporation shall be a Reporting Corporation.
O. "Non-Qualified Option" shall mean a stock option which does not
satisfy the requirements for tax-favored treatment under Section 422 of the
Code.
P. "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option granted pursuant to the provisions of Section V hereof.
Q. "Optionee" shall mean a Participant who is granted an Option
under the terms of this Plan.
R. "Parent" shall mean a parent corporation of the Corporation
within the meaning of Section 424(e) of the Code.
S. "Participant" shall mean any employee or other individual
participating under the Plan.
T. "Public Offering" shall mean an Initial Public Offering or the
consolidation with, or merger with or into, or acquisition of a corporation or
other entity that is a Reporting Corporation.
U. "Reporting Corporation" shall mean, a corporation that is
required to register any class of equity securities under Section 12 of the
Exchange Act.
- 3 -
<PAGE> 5
V. "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
W. "Subsidiary" shall mean a subsidiary corporation of the
Corporation within the meaning of Section 424(f) of the Code.
SECTION I
ADMINISTRATION
The Plan shall be administered by the Committee, which shall be
composed of at least two directors. Subject to the provisions of the Plan, the
Committee may establish from time to time such regulations, provisions,
proceedings and conditions of awards which, in its opinion, may be advisable in
the administration of the Plan. A majority of the Committee shall constitute a
quorum, and, subject to the provisions of Section IV of the Plan, the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee, shall be the acts of
the Committee. If the Corporation is a Reporting Corporation, this Plan is
intended to be a bifurcated plan.
SECTION II
SHARES AVAILABLE
Subject to the adjustments provided in Section VI of the Plan, the
aggregate number of shares of the Common Stock which may be granted for all
purposes under the Plan shall be Two Hundred Thirty Thousand Six Hundred
Ninety-Eight (230,698) shares. Shares of Common Stock underlying the grant of
Options shall be counted against the limitation set forth in the immediately
preceding sentence and may be reused (e.g., in the event that an Option expires,
is terminated unexercised, or is forfeited as to any shares covered thereby).
Incentive and Non-Qualified Stock Options awarded under the Plan may be
fulfilled in accordance with the terms of the Plan with either authorized and
unissued shares of the Common Stock, issued shares of such Common Stock held in
the Corporation's treasury or shares of Common Stock acquired on the open
market.
SECTION III
ELIGIBILITY
Present and future officers and key employees (including officers or
key employees who are also directors) of the Corporation, or of any Parent or
Subsidiary, who are regularly employed on a salaried basis as common law
employees shall be eligible to participate in the Plan. In addition,
non-employee directors, consultants or other service providers of the
Corporation, or of any Parent or Subsidiary, shall be eligible to participate in
the Plan.
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SECTION IV
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the direction of, the
Committee, which shall administer the Plan so as to comply at all times with the
Exchange Act, to the extent such compliance is required, and, subject to the
Code, shall otherwise have plenary authority to interpret the Plan and to make
all determinations specified in or permitted by the Plan or deemed necessary or
desirable for its administration or for the conduct of the Committee's business.
Subject to the provisions of Section X hereof, all interpretations and
determinations of the Committee may be made on an individual or group basis and
shall be final, conclusive, and binding on all interested parties. Subject to
the express provisions of the Plan, the Committee shall have authority, in its
discretion, to determine the persons to whom Options shall be granted, the times
when such Options shall be granted, the number of Options, the exercise price of
each Option, the period(s) during which such Option shall be exercisable
(whether in whole or in part), the restrictions to be applicable to Options and
the other terms and provisions thereof (which need not be identical). In
addition, the authority of the Committee shall include, without limitation, the
following:
A. Financing. The arrangement of temporary financing for an Optionee
by registered broker-dealers, under the rules and regulations of the Federal
Reserve Board, for the purpose of assisting the Optionee in the exercise of an
Option, such authority to include the payment by the Corporation of the
commissions of the broker-dealer.
B. Procedures for Exercise of Option. The establishment of
procedures for an Optionee (i) to exercise an Option by payment of cash or any
other property, including, but not limited to, Promissory Notes due 2000 of the
Corporation or other debt securities of the Corporation, at the fair value
thereof, acceptable to the Committee, (ii) to have withheld from the total
number of shares of Common Stock to be acquired upon the exercise of an Option
that number of shares having a Fair Market Value, which, together with such cash
as shall be paid in respect of fractional shares, shall equal the Option
exercise price of the total number of shares of Common Stock to be acquired,
(iii) to exercise all or a portion of an Option by delivering that number of
shares of Common Stock already owned by him having a Fair Market Value which
shall equal the Option exercise price for the portion exercised and, in cases
where an Option is not exercised in its entirety, to permit the Optionee to
deliver the shares of Common Stock previously acquired by him in payment of
shares of Common Stock to be received pursuant to the exercise of additional
portions of such Option, the effect of which shall be that an Optionee can in
sequence utilize such newly acquired shares of Common Stock in payment of the
exercise price of the entire Option, together with such cash as shall be paid in
respect of fractional shares and (iv) to engage in any form of "cashless"
exercise.
C. Withholding. The establishment of a procedure whereby a number of
shares of Common Stock or other securities may be withheld from the total number
of shares of Common Stock or other securities to be issued upon exercise of an
Option, or for the tender of cash or shares of Common Stock owned by the
Participant to meet the obligation of withholding for taxes incurred by the
Optionee upon such exercise.
D. Types of Options. The Committee may grant Incentive Stock Options
and Non-Qualified Stock Options.
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SECTION V
STOCK OPTIONS
The Committee shall have the authority, in its discretion, to grant
Incentive Stock Options or to grant Non-Qualified Stock Options or to grant both
types of Options. No Option shall be granted for a term of more than ten (10)
years. Notwithstanding anything contained herein to the contrary, an Incentive
Stock Option may be granted only to common law employees of the Corporation or
of any Parent or Subsidiary now existing or hereafter formed or acquired, and
not to any director, officer, consultant or service provider who is not also
such a common law employee. The terms and conditions of the Options shall be
determined from time to time by the Committee; provided, however, that the
Options granted under the Plan shall be subject to the following:
A Exercise Price. The Committee shall establish the exercise price
at the time any Option is granted at such amount as the Committee shall
determine; provided, however, that the exercise price for each share of Common
Stock purchasable under any Incentive Stock Option granted hereunder shall be
such amount as the Committee shall, in its best judgment, determine to be not
less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock at the date the Option is granted; and provided, further, that in
the case of an Incentive Stock Option granted to a person who, at the time such
Incentive Stock Option is granted, owns shares of stock of the Corporation or of
any Parent or Subsidiary which possess more than ten percent (10%) of the total
combined voting power of all classes of shares of stock of the Corporation or of
any Parent or Subsidiary, the exercise price for each share of Common Stock
shall be such amount as the Committee, in its best judgment, shall determine to
be not less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock at the date the Option is granted. The exercise price will
be subject to adjustment in accordance with the provisions of Section VI of the
Plan.
B Payment of Exercise Price. The price per share of Common Stock
with respect to each Option shall be payable at the time the Option is
exercised. Such price shall be payable in cash or, in the discretion of the
Committee, pursuant to any of the methods set forth in Sections IV(A) or (B)
hereof. Shares of Common Stock delivered to the Corporation in payment of the
exercise price shall be valued at the Fair Market Value of the Common Stock on
the date preceding the date of the exercise of the Option.
C Employment Requirement. Unless otherwise provided by the Committee
at the time an Option is granted or by subsequent amendment of the Option, each
Option by its terms shall require the Optionee to remain in the continuous
full-time employ of the Corporation, or of any Parent or Subsidiary, for at
least two (2) years from the date of grant of the Option before the right to
exercise any part of the Option (by him or any other person) will accrue.
D Exercisability of Options. Each Option shall be exercisable in
whole or in part, or in installments, and at such time(s), and subject to the
fulfillment of any conditions on exercisability as may be determined by the
Committee at the time of the grant of such Options; provided, however, that no
Option be exercised at any one time for fewer than one hundred (100) shares of
Common Stock; and provided further, however, that any Option to acquire fewer
than one hundred (100) shares of Common Stock may nevertheless be exercised, but
shall be exercisable in whole only. Subject to the limitations contained in the
preceding sentence, the right to purchase shares of Common Stock shall be
cumulative so that when the right to purchase any shares of Common Stock has
accrued, such shares
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of Common Stock or any part thereof may be purchased at any time thereafter
until the expiration or termination of the Option. Unless otherwise provided by
the Committee at the time an Option is granted or by subsequent amendment of the
Option, no Option shall become exercisable prior to January 1, 1999, except
that, if the Corporation consummates a Public Offering prior to January 1, 1999,
then the date on which the earliest Options granted pursuant to this Plan may be
exercised (the "Initial Exercise Date") shall be advanced to a date (the
"Advanced Exercise Date") that is one hundred eighty (180) days after the
consummation of such Public Offering, but (unless otherwise provided by the
Committee at the time an Option is granted or by subsequent amendment of the
Option) in no event earlier than January 1, 1998, and the respective dates on
which all other Options granted pursuant to this Plan may be exercised shall be
advanced by an amount of time equal to the amount of time between the Advanced
Exercise Date and the Initial Exercise Date.
E. Expiration of Options. No Option by its terms shall be
exercisable after the expiration of ten (10) years from the date of grant of the
Option; provided, however, in the case of an Incentive Stock Option granted to a
person who, at the time such Option is granted, owns shares of stock of the
Corporation or of any Parent or Subsidiary possessing more than ten percent
(10%) of the total combined voting power of all classes of shares of stock of
the Corporation or of any Parent or Subsidiary, such Option shall not be
exercisable after the expiration of five (5) years from the date such Option is
granted.
F. Exercise Upon Death of Optionee. Subject to the provisions of
Sections V(C) and V(I) hereof, in the event of the death of the Optionee prior
to his termination of employment or service relationship with the Corporation or
with any Parent or Subsidiary, his estate (or other beneficiary, if so
designated in writing by the Participant) shall have the right, within one (1)
year (or such longer period as may be provided by the Committee at the time an
Option is granted or by subsequent amendment of the Option) after the date of
death (but in no case after the expiration date of the Option(s)), to exercise
his Option(s) with respect to all or any part of the shares of Common Stock as
to which the deceased Optionee had not exercised his Option at the time of his
death, but (unless otherwise provided by the Committee at the time an Option is
granted or by subsequent amendment of the Option) only to the extent the Option
or Options were exercisable as of the date of his death.
G. Exercise Upon Disability of Optionee. Subject to the provisions
of Sections V(C) and V(I) hereof, if an Optionee's employment or service
relationship with the Corporation or with any Parent or Subsidiary is terminated
because of Disability, he shall have the right, within one (1) year (or such
longer period as may be provided by the Committee at the time an Option is
granted or by subsequent amendment of the Option) after the date of such
termination (but in no case after the expiration of the Option(s)), to exercise
his Option(s) with respect to all or any part of the shares of Common Stock as
to which he had not exercised his Option at the time of such termination, but
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option) only to the extent such Option or Options
were exercisable as of the date of his termination of employment or service
relationship due to Disability.
H. Exercise Upon Optionee's Termination of Service. Except as
provided in the following sentence, if an Optionee's employment or service
relationship with the Corporation or with any Parent or Subsidiary is terminated
for any reason other than those specified in Sections V(F) and (G) above, he
shall have the right, within thirty (30) days (or such longer period as may be
provided by the Committee at the time an Option is granted or by subsequent
amendment of the Option) after the date of such termination (but in no case
after the expiration date of the Option(s)), to exercise his Option(s), but
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent
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amendment of the Option) only with respect to that number of shares of Common
Stock that he was entitled to purchase pursuant to Options that were exercisable
immediately prior to such termination. If an Optionee's employment or service
relationship is terminated for Good Cause by the Corporation or any Parent or
Subsidiary, then the Optionee shall not have the right to exercise any Options
that are vested and nonforfeitable and such Options shall be forfeited.
I. Buy-Out of Vested Options Not Yet Exercisable Upon Termination.
Unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option, if an Optionee's employment or service
relationship is terminated for any reason other than death, Disability or Good
Cause, and such Optionee holds Options that are vested and nonforfeitable, but
which nevertheless are not yet exercisable, then such Optionee shall surrender
and sell to the Corporation, and the Corporation shall purchase and acquire from
such Optionee, all of such Options for a purchase price equal to the excess, if
any, of the total Fair Market Value of the shares of Common Stock issuable upon
the exercise of such Options, in effect at the time of the termination of the
employment or service relationship of such Optionee, over the total exercise
price of such Options. Such sale and purchase shall occur not later than sixty
(60) days after the date on which such Optionee's employment or service
relationship terminated. If the Corporation is unable to pay the amount required
to be paid to an Optionee pursuant to this Section V(I) due to a restriction
imposed on it under the terms of any bank loan or the terms of any instrument or
agreement evidencing any indebtedness or other obligation of the Corporation or
under the Delaware General Corporation Law, the obligations of the Corporation
under this Section V(I) shall be deferred until the Corporation is legally
permitted to make the payment required under this Section V(I).
J. Maximum Amount of Incentive Stock Options. Each Incentive Stock
Option shall provide that to the extent the aggregate of the (i) Fair Market
Value of the shares of Common Stock (determined as of the time of the grant of
the Option) subject to such Incentive Stock Option and (ii) the fair market
values (determined as of the date(s) of grant of the options in question) of all
other shares of Common Stock subject to incentive stock options granted to an
Optionee by the Corporation or any Parent or Subsidiary, which are exercisable
for the first time by any person during any calendar year, exceed(s) One Hundred
Thousand Dollars ($100,000), such excess shares of Common Stock shall not be
deemed to be purchased pursuant to Incentive Stock Options. The terms of the
immediately preceding sentence shall be applied by taking options into account
in the order in which they are granted.
K. Corporation's Call Upon Option Shares Upon Termination for Good
Cause. Unless otherwise provided by the Committee at the time an Option is
granted or by subsequent amendment of the Option, if an Optionee's employment or
service relationship is terminated for Good Cause, then the Corporation shall
have the right, but not the obligation, to purchase from such Optionee all
shares of Common Stock purchased by such Optionee pursuant to this Plan for a
purchase price equal to the exercise price of the Options pursuant to which such
shares of Common Stock were purchased. The Corporation shall exercise such right
by delivery of a written notice of exercise to such Optionee not later than
sixty (60) days after the date on which such Optionee's employment or service
relationship terminated. The closing of any purchase pursuant to the exercise of
such option shall occur not later than thirty (30) days after the delivery of
the notice by the Corporation of its notice of exercise, at the principal
executive offices of the Corporation, unless the Corporation otherwise agrees,
and at a time agreed upon by the Corporation and the Optionee. At such closing,
the Corporation shall pay to the Optionee the total purchase price for the
shares of Common Stock being purchased by wire transfer to an account designated
by such Optionee of immediately available funds in an amount equal to the total
purchase price, against delivery by such
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<PAGE> 10
Optionee or his legal representative of a certificate or certificates
representing all of the shares being purchased from such Optionee, together with
a stock power duly executed in blank, with signature guaranteed, free and clear
of all liens, claims, charges and encumbrances.
L. Corporation's Call Upon Non-Qualified Stock Option Shares Upon
Termination Other than for Good Cause. (i) Unless otherwise provided by the
Committee at the time an Option is granted or by subsequent amendment of the
Option, if an Optionee's employment or service relationship is terminated other
than by reason of death, Disability or Good Cause, then the Corporation shall
have the right, but not the obligation, to purchase from such Optionee all
shares of Common Stock previously acquired pursuant to the exercise of a
Non-Qualified Stock Option granted pursuant to this Plan for a purchase price
equal to the Fair Market Value of such shares in effect on the date on which
such Optionee's employment or service relationship is terminated, or such other
amount as may be provided pursuant to the terms of such Optionee's Non-Qualified
Stock Option. The Corporation shall exercise such right by delivery of written
notice of exercise to such Optionee not later than sixty (60) days after the
date on which such Optionee's employment or service relationship is terminated
or such other date as may be provided pursuant to the terms of such Optionee's
Non-Qualified Stock Option. Such sale and purchase shall occur not later than
thirty (30) days after the date the Corporation provides its written notice of
exercise in accordance with the procedures set forth in Section V(K).
(ii) Unless otherwise provided by the Committee at the time an
Option is granted or by subsequent amendment of the Option, the Corporation
shall have the right, but not the obligation, to purchase shares of Common Stock
acquired by the Optionee or the Optionee's estate (or other beneficiary)
pursuant to the exercise of a Non-Qualified Stock Option after the Optionee's
termination of employment or service relationship pursuant to Section V(F) or
V(G) at a purchase price equal to the Fair Market Value of such shares in effect
on the date of such termination, or such other amount as may be provided
pursuant to the terms of such Optionee's Non-Qualified Stock Option. The
Corporation shall exercise such option by delivery of written notice of exercise
to such Optionee or the Optionee's estate (or beneficiary) not later than sixty
(60) days after the date of exercise by the Optionee or the Optionee's estate
(or beneficiary). Such sale and purchase shall occur not later than thirty (30)
days after the date the Corporation delivers its written notice of exercise in
accordance with the procedures set forth in Section V(K).
M. Corporation's Call Upon Incentive Stock Option Shares Upon
Termination Other than for Good Cause. (i) If the employment of the Optionee is
terminated other than by reason of Disability or Good Cause, then the
Corporation shall have the right, but not the obligation, to purchase from (x)
such Optionee or the Optionee's estate (or other beneficiary) all shares
previously acquired by the Optionee pursuant to the exercise of an Incentive
Stock Option granted pursuant to this Plan, or (y) the Optionee's estate (or
other beneficiary) pursuant to the exercise of an Incentive Stock Option granted
pursuant to this Plan, in accordance with Section V(F) after termination of
employment, for a purchase price equal to the total Fair Market Value of such
shares of Common Stock in effect on the date of termination of employment or
such other amount as may be provided pursuant to the terms of such Optionee's
Incentive Stock Option. The Corporation shall exercise such right by delivery of
a written notice of exercise to such Optionee or his legal representative not
later than sixty (60) days after the date of termination of employment or the
date of the exercise by the Optionee's legal representative of an Incentive
Stock Option in accordance with Section V(F), whichever is applicable. Such sale
and purchase shall occur not later than thirty (30) days after the date the
Corporation provides its written notice of exercise in accordance with the
procedures set forth in Section V(K).
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(ii) If the employment of an Optionee is terminated by reason of
Disability, then the Corporation shall have the right, but not the obligation,
to purchase only such shares that have been acquired pursuant to the exercise of
an Incentive Stock Option and that have been held one (1) year or longer by the
Optionee, for a purchase price equal to the total Fair Market Value of such
shares determined as of the date of termination of employment or such other
amount as may be provided pursuant to the terms of such Optionee's Incentive
Stock Option. The Corporation shall exercise such right by delivery of written
notice of exercise to such Optionee not later than sixty (60) days after
termination of employment or such other date as may be provided pursuant to the
terms of such Optionee's Incentive Stock Option. Such sale and purchase shall
occur not later than thirty (30) days after the date the Corporation provides
its written notice of exercise in accordance with the procedures set forth in
Section V(K).
(iii) The Corporation retains the right, but not the obligation, to
purchase shares of Common Stock acquired by the Optionee pursuant to the
exercise of an Incentive Stock Option in accordance with Section V(G) after
termination of employment if the employment of the Optionee is terminated by
reason of Disability, for a purchase price equal to the total Fair Market Value
of such shares of Common Stock, in effect on the date of termination of
employment or such other amount as may be provided pursuant to the terms of such
Optionee's Incentive Stock Option. The Corporation shall exercise such right by
delivery of a written notice of exercise to such Optionee at any time during the
period beginning on the date which is one (1) year after the date of the
exercise by the Optionee and ending sixty (60) days thereafter. Such sale and
purchase shall occur not later than thirty (30) days after the date the
Corporation provides its written notice of exercise in accordance with the
procedures set forth in Section V(K).
N. Right of First Refusal with Respect to Acquired Shares.
(i) If any Participant desires to sell, assign, encumber, pledge, or
otherwise transfer ("Transfer") any shares of Common Stock acquired pursuant to
this Plan to any person or entity other than the Corporation ("Third Party"),
except pursuant to a Transfer by an individual Participant of all or a portion
of such shares to his ancestors, descendants or spouse (other than as an
incident to the dissolution of marriage) (collectively, "Family Donees"), or to
trusts for the benefit of a Participant or any of his Family Donees, either
inter vivos or, subject to Sections V(F), V(G), V(L) and V(M) hereof, pursuant
to applicable laws of descent and distribution, if such Family Donee or such
trust agrees in writing to be bound by the terms of the restriction contained
herein, such Transfer shall be made only in accordance with the terms of this
Plan and only for cash or cash equivalents.
(ii) Upon receipt by a Participant of any bona fide offer to
purchase all or any portion of the shares of Common Stock owned by such
Participant, his Family Donees, or trusts for his or their benefit, then the
party desiring to make such Transfer ("Offering Party") shall deliver written
notice ("Offer Notice") to the Corporation specifying the name of the Third
Party that is the proposed purchaser of the shares of Common Stock, the number
of shares proposed to be Transferred, the price to be paid in the proposed sale
and all other material conditions of the proposed sale. The Offering Party shall
notify the Corporation of any material changes in the terms of such proposed
Transfer, and such notice shall be treated as an original Offer Notice.
(iii) The Corporation shall have the right, but not the obligation,
to purchase all or any part of the shares of Common Stock offered pursuant to
the Offer Notice for the price and on the terms specified in the Offer Notice by
delivery of a written notice of exercise within sixty (60) days after
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the receipt of the Offer Notice. The closing of any purchase of shares shall
occur within thirty (30) days after the delivery by the Corporation of its
notice of exercise of its rights under this Section V(N) in accordance with the
procedures set forth in Section V(K).
O. Assignability of Corporation's Rights in Certain Events. If the
Corporation is unable to exercise the rights granted to it pursuant to Sections
V(K), V(L), V(M) or V(N) due to a restriction imposed upon it under the terms of
any bank loan or the terms of any instrument or agreement evidencing any
indebtedness or other obligation of the Corporation or under an applicable
provision of the Delaware General Corporation Law, then it will offer to assign
its rights to Cameron by delivery to Cameron of written notice of such offer.
Cameron shall have the right, but not the obligation, to assign his rights under
this Section V(O) to one or more Cameron Affiliates. Cameron and/or the Cameron
Affiliates may exercise the rights of the Corporation to purchase shares of
Common Stock and/or Options assigned pursuant to this Section V(O) by delivery
of a written notice of exercise to the Corporation and the Participant not later
than fifteen (15) days after the delivery by the Corporation of its offer notice
to Cameron. If Cameron and/or the Cameron Affiliates exercise such rights, then
Cameron and/or the Cameron Affiliates shall purchase such shares of Common Stock
and/or Options from the Participant and/or his legal representative on the same
terms and subject to the same conditions as are applicable to the Corporation
under this Plan. If Cameron and/or the Cameron Affiliates do not exercise their
rights pursuant to this Section V(O), then the rights and obligations of the
Corporation under Sections V(K), V(L), V(M) and V(N) shall be deemed to have
been satisfied.
P. Applicability of Certain Provisions Prior to Public Offering. The
provisions of Sections V(L), V(M), V(N) and V(O) shall apply only prior to the
consummation by the Corporation of a Public Offering.
SECTION VI
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
A. Recapitalization, Etc. In the event there is any change in the
Common Stock of the Corporation by reason of any reorganization,
recapitalization, stock split, stock dividend or otherwise, there shall be
substituted for or added to each share of Common Stock theretofore appropriated
or thereafter subject, or which may become subject, to any Option, the number
and kind of shares of stock or other securities into which each outstanding
share of Common Stock shall be so changed or for which each such share shall be
exchanged, or to which each such share be entitled, as the case may be, and the
per share price thereof also shall be appropriately adjusted. Notwithstanding
the foregoing, (i) each such adjustment with respect to an Incentive Stock
Option shall comply with the rules of Section 424(a) of the Code and (ii) in no
event shall any adjustment be made which would render any Incentive Stock Option
granted hereunder to be other than an incentive stock option for purposes of
Section 422 of the Code.
B. Merger, Consolidation or Change in Control of Corporation. Upon
(i) the merger or consolidation of the Corporation with or into another
corporation (pursuant to which the stockholders of the Corporation immediately
prior to such merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in the voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's then outstanding securities), if
the agreement of merger or consolidation does not provide for (A) the
continuance of the Options granted hereunder or (B) the substitution of new
Options granted hereunder, or for the assumption of such Options by the
surviving corporation, (ii) the dissolution,
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liquidation, or sale of substantially all the assets, of the Corporation or
(iii) the Change in Control of the Corporation, then the Committee shall have
the authority, in its discretion, to provide that holders of some or all of any
such Options theretofore granted and still outstanding (and not otherwise
expired) shall have the right immediately prior to the effective date of such
merger, consolidation, dissolution, liquidation, sale of assets or Change in
Control of the Corporation to exercise such Option(s) in whole or in part and
shall have the authority, in its discretion further to provide that any such
Option may be exercised without regard to any installment provision that may
have been made part of the terms and conditions of such Option(s), provided that
(unless otherwise provided by the Committee at the time an Option is granted or
by subsequent amendment of the Option) any conditions precedent to the exercise
of such Options, other than the passage of time, have occurred. The Corporation,
to the extent practicable, shall give advance notice to affected Optionees of
any such merger, consolidation, dissolution, liquidation, sale of assets or
Change in Control of the Corporation. If the Committee makes such provision,
then all such Options which are not so exercised shall be forfeited as of the
effective time of any merger, consolidation, dissolution, liquidation or sale of
assets (but not in the case of a Change in Control of the Corporation).
C. Definition of Change in Control of the Corporation. As used
herein, a "Change in Control of the Corporation" shall be deemed to have
occurred if any person (including any individual, firm, partnership or other
entity) together with all Affiliates and Associates of such person acquires
beneficial ownership, directly or indirectly, of securities of the Corporation
having more than 50% of the combined voting power of the Corporation's then
outstanding securities, such person being hereinafter referred to as an
Acquiring Person. For purposes of this Section VI(C), an Acquiring Person
(including its Affiliates and Associates) shall be determined by excluding (i) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation or any subsidiary of the Corporation, (ii) a corporation owned,
directly or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of the Corporation, (iii) the
Corporation or any subsidiary of the Corporation, (iv) any person who, as of the
effective date of this Plan, is the "Beneficial Owner" (as defined in Rule 13(d)
promulgated under the Exchange Act), directly or indirectly, of securities of
the Corporation having more than 50% of the combined voting power of the
Corporation's then outstanding securities, or (v) only as provided in the
immediately following sentence, a Participant, together with all Affiliates and
Associates of a Participant, who is or becomes the Beneficial Owner. The
provisions of clause (v) of the immediately preceding sentence shall apply only
in determining whether a Change in Control of the Corporation has occurred with
respect to the Option(s) held by the Participant who, together with his
Affiliates or Associates, if any, is or becomes the direct or indirect
Beneficial Owner of the percentage of securities set forth above.
SECTION VII
MISCELLANEOUS PROVISIONS
A. Administrative Procedures. The Committee may establish any
procedures determined by it to be appropriate in discharging its
responsibilities under the Plan. Subject to the provisions of Section X hereof,
all actions and decisions of the Committee shall be final.
B. Assignment or Transfer. No grant or award of any Option made
under the Plan or any rights or interests therein shall be assignable or
transferable by a Participant except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order. During the
lifetime of a Participant Options granted hereunder shall be exercisable only by
the Participant.
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C. Investment Representation. In the case of receipt of shares of
Common Stock or other securities upon exercise of an Option, the Committee may
require, as a condition of receiving such securities, that the Participant
furnish to the Corporation such written representations and information as the
Committee deems appropriate to permit the Corporation, in light of the existence
or nonexistence of an effective registration statement under the Securities Act
to deliver such securities in compliance with the provisions of the Securities
Act.
D. Withholding Taxes. The Corporation shall have the right to deduct
from all cash payments hereunder any federal, state, local or foreign taxes
required by law to be withheld with respect to such payments. In the case of the
issuance or distribution of Common Stock or other securities hereunder, the
Corporation, as a condition of such issuance or distribution, may require the
payment (through withholding from the Participant's salary, reduction of the
number of shares of Common Stock or other securities to be issued, or otherwise)
of any such taxes. Subject to the consent of the Committee, the Participant may
satisfy the withholding obligations by paying to the Corporation a cash amount
equal to the amount required to be withheld or by tendering to the Corporation a
number of shares of Common Stock having a value equivalent to such cash amount,
or by use of any available procedure as described under Section IV(C) hereof.
E. Costs and Expenses. The costs and expenses of administering the
Plan shall be borne by the Corporation and shall not be charged against any
award nor to any employee, director, consultant, or other service provider
receiving an Option.
F. Funding of Plan. The Plan shall be unfunded. The Corporation
shall not be required to segregate any of its assets to assure the payment of
any Option under the Plan. Neither the Participants nor any other persons shall
have any interest in any fund or in any specific asset or assets of the
Corporation or any other entity by reason of any Option, except to the extent
expressly provided hereunder. The interests of each Participant and former
Participant hereunder are unsecured and shall be subject to the general
creditors of the Corporation.
G. Other Incentive Plans. The adoption of the Plan does not preclude
the adoption by appropriate means of any other incentive plan for employees,
directors, consultants, or other service providers.
H. Plurals and Gender. Where appearing in the Plan, masculine gender
shall include the feminine and neuter genders, and the singular shall include
the plural, and vice versa, unless the context clearly indicates a different
meaning.
I. Headings. The headings and sub-headings in this Plan are inserted
for the convenience of reference only and are to be ignored in any construction
of the provisions hereof.
J. Severability. In case any provision of this Plan shall be held
illegal or void, such illegality or invalidity shall not affect the remaining
provisions of this Plan, but shall be fully severable, and the Plan shall be
construed and enforced as if said illegal or invalid provisions had never been
inserted herein.
K. Payments Due Missing Persons. The Corporation shall make a
reasonable effort to locate all persons entitled to benefits under the Plan;
however, notwithstanding any provisions of this Plan to the contrary, if, after
a period of one (1) year from the date such benefits shall be due, any such
persons entitled to benefits have not been located, their rights under the Plan
shall stand
- 13 -
<PAGE> 15
suspended. Before this provision becomes operative, the Corporation shall send a
certified letter to all such persons at their last known addresses advising them
that their rights under the Plan shall be suspended. Subject to all applicable
state laws, any such suspended amounts shall be held by the Corporation for a
period of one (1) additional year and thereafter such amounts shall be forfeited
and thereafter remain the property of the Corporation.
L. Liability and Indemnification. (i) Neither the Corporation nor
any Parent or Subsidiary shall be responsible in any way for any action or
omission of the Committee, or any other fiduciaries in the performance of their
duties and obligations as set forth in this Plan. Furthermore, neither the
Corporation nor any Parent or Subsidiary shall be responsible for any act or
omission of any of their agents, or with respect to reliance upon advice of
their counsel provided that the Corporation and/or the appropriate Parent or
Subsidiary relied in good faith upon the action of such agent or the advice of
such counsel.
(ii) Except for their own gross negligence or willful misconduct
regarding the performance of the duties specifically assigned to them under, or
their willful breach of the terms of, this Plan, the Corporation, each Parent
and Subsidiary and the Committee shall be held harmless by the Participants,
former Participants, beneficiaries and their representatives against liability
or losses occurring by reason of any act or omission. Neither the Corporation,
any Parent or Subsidiary, the Committee, nor any agents, employees, officers,
directors or shareholders of any of them, nor any other person shall have any
liability or responsibility with respect to this Plan, except as expressly
provided herein.
M. Incapacity. If the Committee shall receive evidence satisfactory
to it that a person entitled to receive shares of Common Stock pursuant to an
exercise of an Option is, at the time when such shares become issuable, a minor,
or is physically or mentally incompetent to receive such shares and to give a
valid release thereof, and that another person or an institution is then
maintaining or has custody of such person and that no guardian, committee or
other representative of the estate of such person shall have been duly
appointed, the Committee may make the transfer of such Common Stock otherwise
payable to such person to such other person or institution, including a
custodian under a Uniform Gifts to Minors Act, or corresponding legislation (who
shall be an adult, a guardian of the minor or a trust company), and the release
by such other person or institution shall be a valid and complete discharge for
the transfer of such Common Stock.
N. Cooperation of Parties. All parties to this Plan and any person
claiming any interest hereunder agree to perform any and all acts and execute
any and all documents and papers which are necessary or desirable for carrying
out this Plan or any of its provisions.
O. Governing Law. All questions pertaining to the validity,
construction and administration of the Plan shall be determined in accordance
with the laws of the State of Delaware, without reference to the conflicts of
law principles thereof.
P. Nonguarantee of Employment or Service Relationship. Nothing
contained in this Plan shall be construed as a contract of employment or service
relationship between the Corporation (or any Parent or Subsidiary), and any
Participant, as a right of any Participant to be continued in the employment of,
or service relationship with, the Corporation (or any Parent or Subsidiary), or
as a limitation on the right of the Corporation or any Parent or Subsidiary to
discharge any of its employees, directors, consultants or other service
providers, with or without cause.
- 14 -
<PAGE> 16
Q. Notices. Each notice relating to this Plan shall be in writing
and delivered in person or by certified mail to the proper address. All notices
to the Corporation or the Committee shall be addressed to it at 6 International
Drive, Rye Brook, New York 10573, Attn: Senior Vice President, Human Resources.
All notices to Participants, former Participants, beneficiaries or other persons
acting for or on behalf of such persons shall be addressed to such person at the
last address for such person maintained in the Committee's records.
R. Written Agreements. Each Option shall be evidenced by a signed
written agreement between the Corporation and the Participant containing the
terms and conditions of the Option.
SECTION VIII
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have the right to
amend, suspend or terminate the Plan at any time, provided that no amendment
shall be made which shall increase the total number of shares of the Common
Stock of the Corporation which may be issued and sold pursuant to Options,
reduce the minimum exercise price in the case of an Incentive Stock Option or
modify the provisions of the Plan relating to eligibility with respect to
Incentive Stock Options unless such amendment is made by or with the approval of
the stockholders (such approval being granted within twelve (12) months of the
effective date of such amendment). The Board of Directors of the Corporation
shall be authorized to amend the Plan and the Options granted thereunder (i) to
maintain qualification as "incentive stock options" within the meaning of
Section 422 of the Code, if applicable or (ii) to comply with Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder. Except as
otherwise provided herein, no amendment, suspension or termination of the Plan
shall alter or impair any Options previously granted under the Plan, without the
consent of the holder thereof.
SECTION IX
TERM OF PLAN
The Plan shall remain in effect until the tenth anniversary of the
date the Plan was adopted by the Board of Directors of the Corporation, unless
sooner terminated by such Board of Directors. No Options may be granted under
the Plan subsequent to the termination of the Plan.
SECTION X
CLAIMS PROCEDURES
A. Denial. If any Participant, former Participant or beneficiary is
denied any vested benefit to which he is, or reasonably believes he is, entitled
under this Plan, either in total or in an amount less than the full vested
benefit to which he would normally be entitled, the Committee shall advise such
person in writing the specific reasons for the denial. The Committee shall also
furnish such person at the time with a written notice containing (i) a specific
reference to pertinent Plan provisions, (ii) a description of any additional
material or information necessary for such person to perfect his claim, if
possible, and an explanation of why such material or information is needed and
(iii) an explanation of the Plan's claim review procedure.
B. Written Request for Review. Within sixty (60) days of receipt of
the information stated in subsection (a) above, such person shall, if he desires
further review, file a written request for reconsideration with the Committee.
- 15 -
<PAGE> 17
C. Review of Document. So long as such person's request for review
is pending (including the sixty (60) day period in subsection (b) above), such
person or his duly authorized representative may review pertinent Plan documents
and may submit issues and comments in writing to the Committee.
D. Committee's Final and Binding Decision. A final and binding
decision shall be made by the Committee within sixty (60) days of the filing by
such person of this request for reconsideration; provided, however, that if the
Committee, in its discretion, feels that a hearing with such person or his
representative is necessary or desirable, this period shall be extended for an
additional sixty (60) days.
E. Transmittal of Decision. The Committee's decision shall be
conveyed to such person in writing and shall (i) include specific reasons for
the decision, (ii) be written in a manner calculated to be understood by such
person and (iii) set forth the specific references to the pertinent Plan
provisions on which the decision is based.
F. Limitation on Claims. Notwithstanding any provisions of this Plan
to the contrary, no Participant (nor the estate or other beneficiary of a
Participant) shall be entitled to assert a claim against the Corporation (or
against any Parent or Subsidiary) more than three (3) years after the date the
Participant (or his estate or other beneficiary) initially is entitled to
receive benefits hereunder.
- 16 -
<PAGE> 18
OPTION NO. 96-NQO-[ ]
================================================================================
ENTEX INFORMATION SERVICES, INC.
1996 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION
GRANTED TO
---------------------------
OPTIONEE
- ---------------- -----------------------------
Number of Shares Price per Share (Fair Market
Value on Date of Grant)
DATE GRANTED:____________ EXPIRATION DATE:_____________
================================================================================
<PAGE> 19
NON-QUALIFIED STOCK OPTION AGREEMENT
AGREEMENT made as of the date set forth in Section 24 hereof between
ENTEX Information Services, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and the Employee named in Section 24 hereof, residing at
the address set forth in Section 24 hereof (hereinafter referred to as the
"Employee").
W I T N E S S E T H:
WHEREAS, the Company desires, in connection with the employment of
the Employee and in accordance with its 1996 Stock Option Plan, as Adopted July
8, 1996 (the "Plan"), to provide the Employee with an opportunity to acquire
Common Stock, par value $0.001 per share (hereinafter referred to as "Common
Stock"), in order to link the personal interests of the Employee to those of the
stockholders, customers and employees of the Company and its subsidiaries, by
providing an incentive for outstanding performance;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein set forth and other good and valuable consideration, the
Company and the Employee hereby agree as follows:
1. Confirmation of Grant of Option. Pursuant to a determination by
the Stock Option Committee of the Board of Directors of the Company authorized
to administer the Plan, made on the date of grant set forth in Section 24 hereof
(the "Date of Grant") the Company, subject to the terms of the Plan and this
Agreement, hereby confirms that the Employee has been granted as a matter of
separate inducement and agreement, and in addition to and not in lieu of salary
or other compensation for services, the right to purchase (hereinafter referred
to as the "Option") an aggregate number of shares of Common Stock set forth in
Section 24 hereof, subject to adjustment as provided in Section 9 hereof (such
shares, as adjusted, shall hereinafter be referred to as the "Shares"). The
Option is NOT intended to qualify as an incentive stock option under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of shares of Common Stock
covered by the Option will be the cash amount per share set forth in Section 24
hereof, being not less than 100% of the Fair Market Value of a share of Common
Stock on the Date of Grant, subject to adjustment as provided in Section 9
hereof.
- 1 -
<PAGE> 20
3. Exercise of Option. The Option shall become vested and
exercisable on the terms and conditions hereinafter set forth:
(a) The Option shall become vested and nonforfeitable
cumulatively as to the following amounts of the number of Shares originally
subject thereto (after giving effect to any adjustment pursuant to Section 9
hereof), on the dates indicated:
(i) as to one-half of the Shares, on and after the date which
is two (2) years after the Date of Grant; and
(ii) as to the remaining Shares, on and after the date which
is three (3) years after the Date of Grant.
(b) This Option, to the extent vested and nonforfeitable
pursuant to the provisions of Section 3(a) hereof, shall become exercisable as
of the later of:
(i) the date or dates it becomes so vested and nonforfeitable;
or
(ii) the earlier of (A) January 1, 1999, or (B) if Company
completes a Public Offering prior to January 1, 1999, the date which is
180 days after the date of the consummation of the Public Offering, but in
no event earlier than January 1, 1998.
(c) The Option may be exercised pursuant to the provisions of
this Section 3, by notice and payment to the Company as provided in Sections 12
and 17 hereof.
4. Term of Option. The term of the Option shall be the period after
the Date of Grant set forth in Section 24 hereof, subject to earlier termination
or cancellation as provided in this Agreement. This Option, to the extent
unexercised, shall expire at the end of the period set forth in the immediately
preceding sentence. The holder of the Option shall not have any rights to
dividends or any other rights of a stockholder with respect to any shares of
Common Stock subject to the Option until such shares shall have been issued to
him (as evidenced by the appropriate entry on the books of a duly authorized
transfer agent of the Company) provided that the date of issuance shall not be
earlier than the Closing Date (as hereinafter defined with respect to such
shares pursuant to Section 12 hereof) upon purchase of such shares upon exercise
of the Option.
5. Non-transferability of Option. The Option shall not be
transferable otherwise than by will or by the laws of descent and distribution
or pursuant to a domestic relations order, and the Option may be exercised
during the lifetime of the Employee only by him. More particularly, but without
limiting the generality of the foregoing, the Option may not be assigned,
transferred (except as provided in the next preceding sentence) or otherwise
disposed of, or pledged or hypothecated in any way, and shall not be subject to
execution, attachment or other process. Any assignment, transfer, pledge,
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<PAGE> 21
hypothecation or other disposition of the Option attempted contrary to the
provisions of this Agreement, or any levy of execution, attachment or other
process attempted upon the Option, will be null and void and without effect. Any
attempt to make any such assignment, transfer, pledge, hypothecation or other
disposition of the Option or any attempt to make any such levy of execution,
attachment or other process will cause the Option to terminate immediately upon
the happening of any such event; provided, however, that any such termination of
the Option under the foregoing provisions of this Section 5 will not prejudice
any rights or remedies which the Company or any Parent or Subsidiary may have
under this Agreement or otherwise.
6. Exercise Upon Termination of Employment. (a) If the Employee at
any time ceases to be an employee of the Company and of all Parents or
Subsidiaries thereof by reason of his discharge for Good Cause, the Option shall
forthwith terminate and the Employee shall forfeit all rights hereunder. If,
however, the Employee for any other reason (other than Disability or death)
ceases to be such an employee, the Option may, subject to the provisions of
Section 5 hereof, be exercised by the Employee to the same extent the Employee
would have been entitled under Section 3 hereof to exercise the Option on the
day immediately before the date of such termination of employment, at any time
within thirty (30) days after such termination of employment, at the end of
which period the Option to the extent the Option is not then exercised, shall
terminate and the Employee shall forfeit all rights hereunder, even if the
Employee subsequently becomes employed by the Company or any Parent or
Subsidiary. In no event, however, may the Option be exercised after the
expiration of the term provided in Section 4 hereof.
(b) The Option shall not be affected by any change of duties
or position of the Employee so long as he continues to be a full-time employee
of the Company or any Parent or Subsidiary thereof. If the Employee is granted a
temporary leave of absence, such leave of absence shall be deemed a continuation
of his employment by the Company or any Parent or Subsidiary thereof for the
purposes of this Agreement, but only if and so long as the employing corporation
consents thereto.
7. Exercise Upon Death or Disability. (a) If the Employee dies
before the termination of his employment by the Company or by any Parent or
Subsidiary and on or after the first date upon which he would have been entitled
to exercise the Option under the provisions of Section 3 hereof, the Option may,
subject to the provisions of Section 5 hereof, be exercised with respect to all
or any part of the shares of Common Stock as to which the deceased Employee had
not exercised the Option at the time of his death (but only to the extent the
Option was exercisable at such time), by the estate of the Employee (or by the
person or persons who acquire the right to exercise the Option by written
designation of the Employee) at any time within the period ending one (1) year
after the death of the Employee, at the end of which period the Option, to the
extent not then exercised, shall terminate and the estate or other beneficiaries
shall forfeit all rights hereunder. In no event, however, may the Option be
exercised after the expiration of the term provided in Section 4 hereof.
(b) In the event that the employment of the Employee by the
Company and any Parent or Subsidiary is terminated by reason of the Disability
of the Employee on or after the first date upon which he would have been
entitled to exercise the Option under the provisions of Section 3 hereof, the
Option may, subject to the provisions of Section 5 hereof, be exercised with
respect to all or any part of the shares of Common Stock as to which he had not
exercised the Option at the time of the termination of the Employee's employment
due to Disability (but only
- 3 -
<PAGE> 22
to the extent the Option was exercisable at such time) by the Employee, at any
time within the period ending one (1) year after the date of such termination of
employment, at the end of which period the Option, to the extent not then
exercised, shall terminate and the Employee shall forfeit all rights hereunder
even if the Employee subsequently becomes employed by the Company or any Parent
or Subsidiary. In no event, however, may the Option be exercised after the
expiration of the term provided in Section 4 hereof.
8. Special Rules Regarding Exercisability of the Option. (a) Each
time the Employee elects to exercise his rights to purchase shares of Common
Stock pursuant to the terms of this Option, such exercise may be for no fewer
than one hundred (100) shares of Common Stock; provided, however, that if this
Option is exercisable in whole for fewer than one hundred (100) shares, such
Option may nevertheless be exercised, but may be exercised in whole only.
(b) If the employment of the Employee is terminated by the
Company and all Parents or Subsidiaries thereof for any reason other than death,
Disability or Good Cause, on and after the date he has a vested interest in a
portion or all of the Option granted under this Agreement, but prior to the date
this Option is first exercisable, the Option to purchase shares of Common Stock
hereunder shall be canceled in its entirety and, in consideration therefor, the
Employee shall be paid an amount in cash equal to the product of (i) the number
of shares of Common Stock for which the Option granted hereunder is exercisable
on the date of such termination of employment, multiplied by (ii) an amount in
cash equal to the excess (if any) of the Fair Market Value of one share of
Common Stock in effect on such date over the exercise price set forth herein for
the purchase of one share of Common Stock. Such payment shall be made not later
than sixty (60) days after the date on which the Employee's employment
terminated. If the Company is unable to pay the amount required to be paid to
the Employee pursuant to this Section 8(b) due to a restriction imposed upon it
under the terms of any bank loan or the terms of any instrument or agreement
evidencing any indebtedness or other obligation of the Company or under the
Delaware General Corporation Law, then the obligation of the Company under this
Section 8(b) shall be deferred until the Corporation is legally permitted to
make the payment required under this Section 8(b).
9. Adjustments. In the event there is any change in the Common
Stock of the Company by reason of any reorganization, recapitalization, stock
split, stock dividend or otherwise, there shall be substituted for or added to
each share of Common Stock theretofore appropriated or thereafter subject, or
which may become subject, to this Option the number and kind of shares of stock
or other securities into which each outstanding share of Common Stock shall be
so changed or for which each such share shall be exchanged, or to which each
such share be entitled, as the case may be, and the per share price thereof also
shall be appropriately adjusted.
10. Merger or Consolidation, Etc. of the Company. Upon (a) the
merger or consolidation of the Company with or into another corporation
(pursuant to which the stockholders of the Company immediately prior to such
merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in the voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's
- 4 -
<PAGE> 23
then outstanding securities), if the agreement of merger or consolidation does
not provide for (i) the continuance of this Option, or (ii) the substitution of
new option(s) for this Option, or for the assumption of such Option by the
surviving corporation, (b) the dissolution, liquidation, or sale of
substantially all the assets, of the Company or (c) if applicable to the Option
granted hereunder, a Change in Control of the Company, then if and to the extent
that the Company so determines, in its discretion and as provided in the Plan,
the Employee shall have the right immediately prior to the effective date of
such merger, consolidation, dissolution, liquidation, sale of assets or Change
in Control of the Company, to exercise this Option (to the extent not exercised
and not otherwise expired or terminated) in whole or in part without regard to
any installment provision that may have been made part of the terms and
conditions of this Option provided that any conditions precedent to the exercise
of this Option, other than the passage of time, have occurred. The Company, to
the extent practicable, shall give advance notice to the Employee of such
merger, consolidation, dissolution, liquidation, sale of assets or Change in
Control of the Company. To the extent that the Company makes such a
determination in accordance with this Section 10 and this Option is not so
exercised, it shall be forfeited as of the effective time of any merger,
consolidation, dissolution, liquidation or sale of assets (but not in the case
of a Change in Control of the Company).
11. Registration. If the issuance of shares of Common Stock subject
hereto upon the exercise hereof has not been registered under the Securities Act
of 1933, as amended, then, upon the request of the Company, the Employee will
give a representation as to his investment intent with respect to such shares
prior to their issuance pursuant to Section 12 hereof. The Company may register
or qualify the shares covered by the Option for sale pursuant to the Securities
Act of 1933, as amended, at any time prior to or after the exercise in whole or
in part of the Option.
12. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by the delivery of
a written notice of exercise (substantially in the form of Exhibit A hereto) and
payment to the Company in accordance with the procedure prescribed herein. Each
such notice shall:
(i) state the election to exercise the Option and the number of
Shares in respect of which it is being exercised;
(ii) contain a representation and agreement as to investment intent,
if required by counsel to the Company with respect to such Shares, in form
satisfactory to counsel for the Company;
(iii) be signed by the Employee or the person or persons entitled to
exercise the Option and, if the Option is being exercised by any person or
persons other than the Employee, be accompanied by proof, satisfactory to
counsel for the Company, of the right of such person or persons to
exercise the Option; and
(iv) be received by the Company on or before the date of the
expiration of this Option. In the event the date of expiration of this
Option falls on a day which is not a regular business day at the Company's
executive office in Rye Brook, New York then
- 5 -
<PAGE> 24
such written notice must be received at such office on or before the last
regular business day prior to such date of expiration.
(b) Upon receipt of such notice, the Company shall specify, by
written notice to the Employee or to the person or persons exercising the
Option, a date and time (such date and time being herein called the "Closing
Date") and place for payment of the full purchase price of such Shares. The
Closing Date shall not be more than thirty (30) days after the date the notice
of exercise is received by the Company unless another date is agreed upon by the
Company and the Employee or the person or persons exercising the Option or is
required upon advice of counsel for the Company in order to meet the
requirements of Section 13 hereof.
(c) Payment of the purchase price of any shares of Common
Stock, in respect of which the Option shall be exercised, shall be made by the
Employee or such person or persons at the place specified by the Company on or
before the Closing Date by delivering to the Company (i) a check payable to the
order of the Company, or unless otherwise provided in Section 24 hereof, (ii)
properly endorsed certificates of shares of Common Stock (or certificates
accompanied by an appropriate stock power) with signature guaranteed by a bank
or trust company or New York Stock Exchange member firm representing shares of
Common Stock having a Fair Market Value equal to the aggregate exercise price of
the shares being acquired pursuant to this Option, it being understood and
agreed that if this Option is not exercised in whole, the Employee shall be
permitted to deliver shares previously acquired pursuant to prior exercises of
this Option in payment of the exercise price upon a subsequent exercise of this
Option, except that fractional shares shall be paid for in cash, (iii) to have
withheld from the total number of shares of Common Stock to be acquired upon the
exercise of an Option that number of shares having a Fair Market Value equal to
the aggregate exercise price of the shares being acquired pursuant to this
Option, except that fractional shares shall be paid for in cash, or (iv) any
combination of the foregoing.
(d) The Option shall be deemed to have been exercised with
respect to any particular shares of Common Stock if, and only if, the preceding
provisions of this Section 12 and the provisions of Section 13 hereof shall have
been complied with, in which event the Option shall be deemed to have been
exercised on the date the notice of exercise of the Option was received by the
Company. Anything in this Agreement to the contrary notwithstanding, any notice
of exercise given pursuant to the provisions of this Section 12 shall be void
and of no effect if all the preceding provisions of this Section 12 and the
provisions of Section 13 shall not have been complied with.
(e) The certificate or certificates for shares of Common Stock
as to which the Option shall be exercised will be registered in the name of the
Employee (or in the name of the Employee's estate or other beneficiary if the
Option is exercised after the Employee's death), or if the Option is exercised
by the Employee and if the Employee so requests in the notice exercising the
Option, will be registered in the name of the Employee and another person
jointly, with right of survivorship and will be delivered on the Closing Date to
the Employee at the place specified for the closing, but only upon compliance
with all of the provisions of this Agreement.
- 6 -
<PAGE> 25
(f) If the Employee fails to accept delivery of and pay for
all or any part of the number of Shares specified in such notice upon tender or
delivery thereof on the Closing Date, his right to exercise the Option with
respect to such undelivered Shares may be terminated in the sole discretion of
the Board of Directors of the Company. The Option may be exercised only with
respect to full Shares.
(g) The Company shall not be required to issue or deliver any
certificate or certificates for shares of its Common Stock purchased upon the
exercise of any part of this Option prior to the payment to the Company, upon
its demand, of any amount requested by the Company for the purpose of satisfying
its liability, if any, to withhold state or local income or earnings tax or any
other applicable tax or assessment (plus interest or penalties thereon, if any,
caused by a delay in making such payment) incurred by reason of the exercise of
this Option or the transfer of shares thereupon. Such payment shall be made by
the Employee in cash or, with the consent of the Company, by tendering to the
Company shares of Common Stock equal in value to the amount of the required
withholding. In the alternative, the Company may, at its option, satisfy such
withholding requirements by withholding from the shares of Common Stock to be
delivered to the Employee pursuant to an exercise of this Option a number of
shares of Common Stock equal in value to the amount of the required withholding.
13. Approval of Counsel. The exercise of the Option and the issuance
and delivery of shares of Common Stock pursuant thereto shall be subject to
approval by the Company's counsel of all legal matters in connection therewith,
including compliance with the requirements of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, and the requirements of any stock exchange upon which
the Common Stock may then be listed.
14. Resale of Common Stock. (a) If so requested by the Company, upon
any sale or transfer of the Common Stock purchased upon exercise of the Option,
the Employee shall deliver to the Company an opinion of counsel satisfactory to
the Company to the effect that either (i) the Common Stock to be sold or
transferred has been registered under the Securities Act of 1933, as amended,
and that there is in effect a current prospectus meeting the requirements of
Section 10(a) of said Act which is being or will be delivered to the purchaser
or transferee at or prior to the time of delivery of the certificates evidencing
the Common Stock to be sold or transferred, or (ii) such Common Stock may then
be sold without violating Section 5 of said Act.
(b) The Common Stock issued upon exercise of the Option shall
be subject to the restrictions set forth in Exhibit B hereto and shall bear the
following legend if required by the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN A STOCK OPTION AGREEMENT BY
AND BETWEEN THE HOLDER HEREOF AND ENTEX INFORMATION SERVICES,
INC. AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
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<PAGE> 26
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL (I) ALL OF SUCH
RESTRICTIONS HAVE EXPIRED OR HAVE BEEN WAIVED BY ENTEX
INFORMATION SERVICES, INC. AND (II) SUCH SHARES HAVE FIRST
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(UNLESS, IN THE OPINION OF COUNSEL FOR ENTEX INFORMATION
SERVICES, INC., SUCH REGISTRATION IS NOT REQUIRED).
15. Reservation of Shares. The Company shall at all times during the
term of the Option reserve and keep available such number of shares of the class
of stock then subject to the Option as will be sufficient to satisfy the
requirements of this Agreement.
16. Limitation of Action. The Employee and the Company each
acknowledges that every right of action accruing to him or it, as the case may
be, and arising out of or in connection with this Agreement against the Company
or a Parent or Subsidiary, on the one hand, or against the Employee, on the
other hand, shall, irrespective of the place where an action may be brought,
cease and be barred by the expiration of three years from the date of the act or
omission in respect of which such right of action arises.
17. Notices. Each notice relating to this Agreement shall be in
writing and delivered in person or by certified mail to the proper address. All
notices to the Company or the Committee shall be addressed to them at ENTEX
Information Services, Inc., 6 International Drive, Rye Brook, N.Y. 10573, Attn:
Senior Vice President, Human Resources. All notices to the Employee shall be
addressed to the Employee or such other person or persons at the Employee's
address above specified. Anyone to whom a notice may be given under this
Agreement may designate a new address by notice to that effect.
18. Benefits of Agreement. This Agreement shall inure to the benefit
of and be binding upon each successor and assign of the Company. All obligations
imposed upon the Employee and all rights granted to the Company under this
Agreement shall be binding upon the Employee's heirs, legal representatives and
successors.
19. Severability. In the event that any one or more provisions of
this Agreement shall be deemed to be illegal or unenforceable, such illegality
or unenforceability shall not affect the validity and enforceability of the
remaining legal and enforceable provisions hereof, which shall be construed as
if such illegal or unenforceable provision or provisions had not been inserted.
20. Governing Law. This Agreement will be construed and governed in
accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
21. Employment. Nothing contained in this Agreement shall be
construed as (a) a contract of employment between the Employee and the Company
or any Parent or Subsidiary, (b) as a right of the Employee to be continued in
the employ of the Company or any Parent or Subsidiary, or
- 8 -
<PAGE> 27
(c) as a limitation of the right of the Company or any Parent or Subsidiary to
discharge the Employee at any time, with or without cause.
22. Definitions. Unless otherwise defined herein, all capitalized
terms used herein shall have the same meanings assigned to them in the Plan.
23. Incorporation of Terms of Plan. This Agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference.
24. Information Concerning the Employee and Terms of Option. This
Agreement incorporates the following terms, definitions and information:
(a) Date of Agreement:______________________________________
(b) Employee:_______________________________________________
(c) Address of Employee:____________________________________
________________________________________________________
(d) Employee's Social Security Number_______________________
(e) Date of Grant (Section 1):______________________________
(f) Number of Shares of Common Stock Subject to Option
(Section 1):____________________________________________
(g) Purchase Price of each share of Common Stock covered by
Option (Section 2)______________________________________
(h) Term of Option (Section 4):_____________________________
- 9 -
<PAGE> 28
(i) Permitted Additional Methods of Exercise of Option
(Section 13(c)) [check all that apply]: (i) shares of
Common Stock ______; (ii) withholding of shares of
Common Stock ______; (iii) combination ______.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its name by its President or one of its Vice Presidents and the
Employee has hereunto set his hand all as of the date, month and year first
above written.
ENTEX INFORMATION SERVICES, INC.
By:
------------------------------------
Name:
Title:
----------------------------------------
Signature of Employee
- 10 -
<PAGE> 29
EXHIBIT A
NON-QUALIFIED STOCK OPTION EXERCISE FORM
[DATE]
ENTEX Information Services, Inc.
Six International Drive
Rye Brook, New York 10573
Attention: [Secretary]
Dear Sirs:
Pursuant to the provisions of the Non-Qualified Stock Option
Agreement dated [_______], whereby you have granted to me a non-qualified stock
option to purchase [ ] common shares, par value $0.001 per share, of ENTEX
Information Services, Inc. (the "Company"), I hereby notify you that I elect to
exercise my option to purchase ____________________ of the shares covered by
such option at the exercise price specified therein. In full payment of the
price for the shares being purchased hereby, I am delivering to you herewith (a)
a check payable to the order of the Company in the amount of $_____________,* or
(b) a certificate or certificates for [ ] shares of Common Stock of the Company,
and which have a fair market value as of the date hereof of $_____________, and
a check, payable to the order of the Company, in the amount of $_____________.**
Any such stock certificate or certificates are endorsed, or accompanied by an
appropriate stock power, to the order of the Company, with my signature
guaranteed by a bank or trust company or by a member firm of the New York Stock
Exchange. [I hereby acknowledge that I am purchasing these shares of Common
Stock for investment purposes only and not with a view to the resale or
distribution thereof.]
Very truly yours,
------------------------------------
[Address]
(For notices, reports, dividend
checks and other communications to
stockholders.)
- --------
* $________ of this amount is the purchase price of the shares, and the
balance represents payment of withholding taxes as follows: Federal
$___________, State $____________ and Local $_________.
** $________ of this amount is at least equal to the current market value
of one share of Common Stock of the Company, and the balance represents payment
of withholding taxes as follows: Federal $_________, State $______ and Local
$_______.
<PAGE> 30
EXHIBIT B
RESTRICTIONS
The restrictions set forth below (other than the restriction
contained in paragraph 1, which shall continue indefinitely) shall apply to all
shares purchased pursuant to this Agreement until the completion by the Company
of a Public Offering:
1. If the employment of the Employee is terminated for Good Cause,
then the Company shall have the right, but not the obligation, to purchase from
such Employee all shares of Common Stock acquired pursuant to this Agreement for
a purchase price equal to the exercise price of the Option pursuant to which
such shares were purchased. The Company shall exercise such right by delivery of
a written notice of exercise to such Employee not later than sixty (60) days
after the date on which the employment of such Employee terminated (the
"Termination Date").
2. If the employment of the Employee is terminated other than by
reason of death, Disability or Good Cause, then the Company shall have the
right, but not the obligation, to purchase from such Employee all shares of
Common Stock acquired pursuant to this Agreement for a purchase price equal to
the total Fair Market Value of the shares of Common Stock acquired under this
Agreement in effect the Termination Date. The Company shall exercise such right
by delivery of a written notice of exercise to such Employee not later than
sixty (60) days after the Termination Date.
3. If the Employee's employment is terminated due to death or
Disability, then the Company shall have the right, but not the obligation, to
purchase all shares of Common Stock acquired by the Employee or his legal
representative (or his beneficiary) pursuant to this Agreement at a purchase
price equal to the Fair Market Value of such shares in effect on the Termination
Date. The Company shall exercise such right by delivery to the Employee or his
legal representative (or his beneficiary) of a written notice of exercise not
later than sixty (60) days after the date of the exercise by the Employee or his
legal representative (or his beneficiary) of Options following the Termination
Date.
4. (a) If the Employee desires to sell, assign, encumber, pledge or
otherwise transfer ("Transfer") any shares of Common Stock acquired pursuant to
this Agreement to any person or entity other than the Company ("Third Party"),
except pursuant to a Transfer by the Employee of all or a portion of such shares
to his ancestors, descendants or spouse (other than as an incident to the
dissolution of marriage) (collectively, "Family Donees"), or to one or more
trusts for the benefit of the Employee or any of his Family Donees, either inter
vivos, or, subject to the provisions hereof relating to the death or Disability
of the Employee, pursuant to applicable laws of descent and distribution, if
such Family Donee or such trust agrees in writing to be bound by the terms of
the restrictions contained in this Agreement, such Transfer shall be made only
in accordance with this Agreement and only for cash or cash equivalents.
- 1 -
<PAGE> 31
(b) Upon receipt by the Employee of any bona fide offer to
purchase all or any portion of the shares of Common Stock owned by such
Employee, his Family Donees or trusts for his or their benefit, then the party
proposing to make the Transfer (the "Offering Party") shall deliver written
notice ("Offer Notice") to the Company specifying the name of the Third Party
that is the proposed purchaser of the shares of Common Stock, the number of
shares proposed to be transferred, the price to be paid in the proposed sale and
all other material conditions of the proposed sale. The Offering Party shall
notify the Company of any material changes in the terms of such proposed
Transfer, and such notice shall be treated as an original Offer Notice.
(c) The Company shall have the right, but not the obligation,
to purchase all or any part of the shares of Common Stock offered pursuant to
the Offer Notice for the price and on the terms specified in the Offer Notice by
delivery of a written notice of exercise within sixty (60) days after the
receipt of the Offer Notice.
5. If the Company is unable to exercise the rights granted to it
pursuant to paragraphs 1 through 4 above due to a restriction imposed upon the
Company under the terms of any bank loan or the terms of any instrument or
agreement evidencing any indebtedness or other obligation of the Company or
under an applicable provision of the Delaware General Corporation Law, then the
Company will offer to assign its rights to Cameron by delivery of written notice
of such offer. Cameron shall have the right, but not the obligation, to assign
his rights hereunder to one or more Cameron Affiliates. Cameron and/or the
Cameron Affiliates may exercise the rights of the Company to purchase shares of
Common Stock assigned pursuant to this paragraph 5 by delivery of a written
notice of exercise to the Company and the Employee not later than fifteen (15)
days after delivery by the Company of its offer notice to Cameron. If Cameron
and/or the Cameron Affiliates exercise such rights, then Cameron and/or the
Cameron Affiliates shall purchase such shares of Common Stock from the Employee
and/or his legal representative on the same terms and subject to the same
conditions as are applicable to the Company under this Agreement. If Cameron
and/or the Cameron Affiliates do not exercise their rights under this paragraph
5, then the rights and obligations of the Company under paragraphs 1 through 4
above shall be deemed to have been satisfied.
6. The closing of any purchase pursuant to the exercise of any of
the foregoing rights shall occur not later than thirty (30) days after the
delivery of the notice of exercise by the Company, Cameron or the Cameron
Affiliates, as the case may be, at the principal executive offices of the
Company, unless the purchaser otherwise agrees, and at a time agreed upon by the
Employee or his legal representative or the Offering Party, as the case may be
and the purchaser. At such closing, the purchaser shall pay to the Employee or
his legal representative the total purchase price for the shares being purchased
by check, payable to the order of the Employee or his legal representative or
the Offering Party, as the case may be, against delivery by the Employee or his
legal representative or the Offering Party, as the case may be of a certificate
or certificates representing all of the shares being purchased, together with a
stock power duly executed in blank with signature guaranteed, free and clear of
all liens, claims, charges and encumbrances.
- 2 -
<PAGE> 32
OPTION NO. 96-ISO-[ ]
================================================================================
ENTEX INFORMATION SERVICES, INC.
1996 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
GRANTED TO
-----------------------------
OPTIONEE
- ---------------- -----------------------------------
Number of Shares Price per Share (Fair Market Value
on Date of Grant)
DATE GRANTED:____________ EXPIRATION DATE:_____________
================================================================================
<PAGE> 33
INCENTIVE STOCK OPTION AGREEMENT
AGREEMENT made as of the date set forth in Section 27 hereof between
ENTEX Information Services, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and the Employee named in Section 27 hereof, residing at
the address set forth in Section 27 hereof (hereinafter referred to as the
"Employee").
W I T N E S S E T H:
WHEREAS, the Company desires, in connection with the employment of
the Employee and in accordance with its 1996 Stock Option Plan, as Adopted July
8, 1996 (the "Plan"), to provide the Employee with an opportunity to acquire
Common Stock, par value $0.001 per share (hereinafter referred to as "Common
Stock"), in order to link the personal interest of the Employee to those of the
stockholders, customers and employees of the Company and its subsidiaries, by
providing an incentive for outstanding performance;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein set forth and other good and valuable consideration, the
Company and the Employee hereby agree as follows:
1. Confirmation of Grant of Option. Pursuant to a determination by
the Stock Option Committee of the Board of Directors of the Company authorized
to administer the Plan, made on the date of grant set forth in Section 27 hereof
(the "Date of Grant") the Company, subject to the terms of the Plan and this
Agreement, hereby confirms that the Employee has been granted as a matter of
separate inducement and agreement, and in addition to and not in lieu of salary
or other compensation for services, the right to purchase (hereinafter referred
to as the "Option") an aggregate number of shares of Common Stock set forth in
Section 27 hereof, subject to adjustment as provided in Section 10 hereof (such
shares, as adjusted, shall hereinafter be referred to as the "Shares"). The
Option is intended to qualify as an incentive stock option under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of shares of Common Stock
covered by the Option will be the cash amount per share set forth in Section 27
hereof, being not less than the percentage of the Fair Market Value of a share
of Common Stock on the Date of Grant set forth in Section 27 hereof, subject to
adjustment as provided in Section 10 hereof.
3. Exercise of Option. The Option shall become vested and
exercisable on the terms and conditions hereinafter set forth:
(a) The Option shall become vested and nonforfeitable
cumulatively as to the following amounts of the number of Shares originally
subject thereto (after giving effect to any adjustment pursuant to Section 10
hereof), on the dates indicated:
(i) as to one half of the Shares, on and after the date which
is two (2) years after the Date of Grant; and
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<PAGE> 34
(ii) as to the remaining Shares, on and after the date which
is three (3) years after the Date of Grant.
(b) This Option, to the extent vested and nonforfeitable
pursuant to the provisions of Section 3(a) hereof, shall become
exercisable as of the later of:
(i) the date or dates it becomes so vested and nonforfeitable;
or
(ii) the earlier of (A) January 1, 1999, or (B) if the Company
completes a Public Offering prior to January 1, 1999, the date which is
180 days after the date of the consummation of the Public Offering, but in
no event earlier than January 1, 1998.
(c) The Option may be exercised pursuant to the provisions of
this Section 3, by notice and payment to the Company as provided in
Sections 13 and 18 hereof.
4. Term of Option. The term of the Option shall be the period
after the Date of Grant set forth in Section 27 hereof, subject to earlier
termination or cancellation as provided in this Agreement. This Option, to
the extent unexercised, shall expire at the end of the period set forth in
the immediately preceding sentence. The holder of the Option shall not
have any rights to dividends or any other rights of a stockholder with
respect to any shares of Common Stock subject to the Option until such
shares shall have been issued to him (as evidenced by the appropriate
entry on the books of a duly authorized transfer agent of the Company)
provided that the date of issuance shall not be earlier than the Closing
Date (as hereinafter defined with respect to such shares pursuant to
Section 13 hereof) upon purchase of such shares upon exercise of the
Option.
5. Non-transferability of Option. The Option shall not be
transferable otherwise than by will or by the laws of descent and
distribution or pursuant to a domestic relations order, and the Option may
be exercised during the lifetime of the Employee only by him. More
particularly, but without limiting the generality of the foregoing, the
Option may not be assigned, transferred (except as provided in the next
preceding sentence) or otherwise disposed of, or pledged or hypothecated
in any way, and shall not be subject to execution, attachment or other
process. Any assignment, transfer, pledge, hypothecation or other
disposition of the Option attempted contrary to the provisions of this
Agreement, or any levy of execution, attachment or other process attempted
upon the Option, will be null and void and without effect. Any attempt to
make any such assignment, transfer, pledge, hypothecation or other
disposition of the Option or any attempt to make any such levy of
execution, attachment or other process will cause the Option to terminate
immediately upon the happening of any such event; provided, however, that
any such termination of the Option under the foregoing provisions of this
Section 5 will not prejudice any rights or remedies which the Company or
any Parent or Subsidiary may have under this Agreement or otherwise.
6. Exercise Upon Termination of Employment. (a) If the
Employee at any time ceases to be an employee of the Company and of all
Parents or Subsidiaries thereof by reason of his discharge for Good Cause,
the Option shall forthwith terminate and the Employee shall forfeit all
rights hereunder. If, however, the Employee for any other reason (other
than Disability or death) ceases to be such an employee, the Option may,
subject to the provisions
- 2 -
<PAGE> 35
of Sections 5 and 9 hereof, be exercised by the Employee to the same
extent the Employee would have been entitled under Section 3 hereof to
exercise the Option on the day immediately before the date of such
termination of employment, at any time within thirty (30) days after such
termination of employment, at the end of which period the Option, to the
extent not then exercised, shall terminate and the Employee shall forfeit
all rights hereunder, even if the Employee subsequently becomes employed
by the Company or any Parent or Subsidiary. In no event, however, may the
Option be exercised after the expiration of the term provided in Section 4
hereof.
(b) The Option shall not be affected by any change of
duties or position of the Employee so long as he continues to be a
full-time employee of the Company or any Parent or Subsidiary thereof. If
the Employee is granted a temporary leave of absence, such leave of
absence shall be deemed a continuation of his employment by the Company or
any Parent or Subsidiary thereof for the purposes of this Agreement, but
only if and so long as the employing corporation consents thereto.
7. Exercise Upon Death or Disability. (a) If the Employee dies
before the termination of his employment by the Company or by any Parent
or Subsidiary and on or after the first date upon which he would have been
entitled to exercise the Option under the provisions of Section 3 hereof,
the Option may, subject to the provisions of Sections 5 and 9 hereof, be
exercised with respect to all or any part of the shares of Common Stock as
to which the deceased Employee had not exercised the Option at the time of
his death (but only to the extent the Option was exercisable at such
time), by the estate of the Employee (or by the person or persons who
acquire the right to exercise the Option by written designation of the
Employee) at any time within the period ending one (1) year after the
death of the Employee, at the end of which period the Option, to the
extent not then exercised, shall terminate and the estate or other
beneficiaries shall forfeit all rights hereunder. In no event, however,
may the Option be exercised after the expiration of the term provided in
Section 4 hereof.
(b) In the event that the employment of the Employee by
the Company and any Parent or Subsidiary is terminated by reason of the
Disability of the Employee on or after the first date upon which he would
have been entitled to exercise the Option under the provisions of Section
3 hereof, the Option may, subject to the provisions of Sections 5 and 9
hereof, be exercised with respect to all or any part of the shares of
Common Stock as to which he had not exercised the Option at the time of
the termination of the Employee's employment due to his Disability (but
only to the extent the Option was exercisable at such time) by the
Employee, at any time within the period ending one (1) year after the date
of such termination of employment, at the end of which period the Option,
to the extent not then exercised, shall terminate and the Employee shall
forfeit all rights hereunder even if the Employee subsequently becomes
employed by the Company or any Parent or Subsidiary. In no event, however,
may the Option be exercised after the expiration of the term provided in
Section 4 hereof.
8. Special Rules Regarding Exercisability of the Option. (a)
Each time the Employee elects to exercise his rights to purchase shares of
Common Stock pursuant to the terms of this Option, such exercise may be
for no fewer than one hundred (100) shares of Common Stock; provided,
however, that if this Option is exercisable in whole for fewer than
- 3 -
<PAGE> 36
one hundred (100) shares, such Option may nevertheless be exercised, but
may be exercised in whole only.
(b) If the employment of the Employee is terminated by
the Company and all Parents or Subsidiaries thereof for any reason other
than death, Disability, or Good Cause, on and after the date he has a
vested interest in a portion or all of the Option granted under this
Agreement, but prior to the date this Option is first exercisable, the
Option to purchase shares of Common Stock hereunder shall be canceled in
its entirety and, in consideration therefor, the Employee shall be paid an
amount in cash equal to the product of (i) the number of shares of Common
Stock for which the Option granted hereunder is exercisable on the date of
such termination of employment, multiplied by (ii) an amount in cash equal
to the excess (if any) of the Fair Market Value of one share of Common
Stock in effect on such date over the exercise price set forth herein for
the purchase of one share of Common Stock. Such payment shall be made not
later than sixty (60) days after the date on which the Employee's
employment terminated. If the Company is unable to pay the amount required
to be paid to the Employee pursuant to this Section 8(b) due to a
restriction imposed upon it under the terms of any bank loan or the terms
of any instrument or agreement evidencing any indebtedness or other
obligation of the Company or under the Delaware General Corporation Law,
then the obligation of the Company under this Section 8(b) shall be
deferred until the Corporation is legally permitted to make the payment
required under this Section 8(b).
9. Limitation on Exercisability. To the extent the aggregate
of (a) the Fair Market Value of Common Stock (determined as of the date of
this Agreement) subject to purchase under this Option and (b) the fair
market values (determined as of the appropriate date(s) of grant) of all
other shares of stock subject to incentive stock options granted to the
Employee by the Company or any Parent or Subsidiary, which are exercisable
for the first time by the Employee during any calendar year, exceed(s) One
Hundred Thousand Dollars ($100,000), such excess shares of stock shall not
be deemed to be purchased pursuant to incentive stock options. The terms
of the immediately preceding sentence shall be applied by taking options
into account in the order in which they are granted.
10. Adjustments. In the event there is any change in the
Common Stock of the Company by reason of any reorganization,
recapitalization, stock split, stock dividend or otherwise, there shall be
substituted for or added to each share of Common Stock theretofore
appropriated or thereafter subject, or which may become subject, to this
Option the number and kind of shares of stock or other securities into
which each outstanding share of Common Stock shall be so changed or for
which each such share shall be exchanged, or to which each such share be
entitled, as the case may be, and the per share price thereof also shall
be appropriately adjusted; provided, however, that (i) no such adjustment
shall be made so as to deem such modification, extension or renewal of the
Option as the issuance of a new option under Section 424(h) of the Code,
or so as to prevent the Company or any other corporation or subsidiary
thereof, if the Employee shall become employed by such corporation by
reason of the transaction in respect of which such adjustment is made,
from being a corporation issuing or assuming the Option in a transaction
to which Section 424(a) of the Code applies and (ii) in no event shall any
adjustment be made which would render any option granted hereunder to be
other than an incentive stock option for purposes of Section 422(a) of the
Code.
- 4 -
<PAGE> 37
11. Merger or Consolidation, Etc. of the Company. Subject to
the provisions of Section 9 hereof, upon (a) the merger or consolidation
of the Company with or into another corporation (pursuant to which the
stockholders of the Company immediately prior to such merger or
consolidation will not, as of the date of such merger or consolidation,
own a beneficial interest in the voting securities of the corporation
surviving such merger or consolidation having at least a majority of the
combined voting power of such corporation's then outstanding securities),
if the agreement of merger or consolidation does not provide for (i) the
continuance of this Option, or (ii) the substitution of new option(s) for
this Option, or for the assumption of such Option by the surviving
corporation, (b) the dissolution, liquidation, or sale of substantially
all the assets, of the Company or (c) if applicable to the Option granted
hereunder, a Change in Control of the Company, then, if and to the extent
that the Company so determines in its discretion and as provided in the
Plan, the Employee shall have the right immediately prior to the effective
date of such merger, consolidation, dissolution, liquidation, sale of
assets or Change in Control of the Company, to exercise this Option (to
the extent not exercised and not otherwise expired or terminated) in whole
or in part without regard to any installment provision that may have been
made part of the terms and conditions of this Option provided that any
conditions precedent to the exercise of this Option, other than the
passage of time, have occurred. The Company, to the extent practicable,
shall give advance notice to the Employee of such merger, consolidation,
dissolution, liquidation, sale of assets or Change in Control of the
Company. To the extent that the Company makes such a determination in
accordance with this Section 11 and this Option is not so exercised, it
shall be forfeited as of the effective time of any merger, consolidation,
dissolution, liquidation or sale of assets (but not in the case of a
Change in Control of the Company).
12. Registration. If the issuance of shares of Common Stock
subject hereto upon the exercise hereof has not been registered under the
Securities Act of 1933, as amended, then, upon the request of the Company,
the Employee will give a representation as to his investment intent with
respect to such shares prior to their issuance pursuant to Section 13
hereof. The Company may register or qualify the shares covered by the
Option for sale pursuant to the Securities Act of 1933, as amended, at any
time prior to or after the exercise in whole or in part of the Option.
13. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by the
delivery of written notice (substantially, in the form of Exhibit A
hereto) and payment to the Company in accordance with the procedure
prescribed herein. Each such notice shall:
(i) state the election to exercise the Option and the
number of Shares in respect of which it is being exercised;
(ii) contain a representation and agreement as to
investment intent, if required by counsel to the Company with respect to
such Shares, in form satisfactory to counsel for the Company;
(iii) be signed by the Employee or the person or persons
entitled to exercise the Option and, if the Option is being exercised by
any person or persons other than
- 5 -
<PAGE> 38
the Employee, be accompanied by proof, satisfactory to counsel for the
Company, of the right of such person or persons to exercise the Option;
and
(iv) be received by the Company on or before the date of
the expiration of this Option. In the event the date of expiration of this
Option falls on a day which is not a regular business day at the Company's
executive office in Rye Brook, New York then such written notice must be
received at such office on or before the last regular business day prior
to such date of expiration.
(b) Upon receipt of such notice, the Company shall
specify, by written notice to the Employee or to the person or persons
exercising the Option, a date and time (such date and time being herein
called the "Closing Date") and place for payment of the full purchase
price of such Shares. The Closing Date shall not be more than thirty (30)
days after the date the notice of exercise is received by the Company
unless another date is agreed upon by the Company and the Employee or the
person or persons exercising the Option or is required upon advice of
counsel for the Company in order to meet the requirements of Section 14
hereof.
(c) Payment of the purchase price of any shares of
Common Stock, in respect of which the Option shall be exercised, shall be
made by the Employee or such person or persons at the place specified by
the Company on or before the Closing Date by delivering to the Company (i)
a check payable to the order of the Company, or unless otherwise provided
in Section 27 hereof, by (ii) properly endorsed certificates of shares of
Common Stock (or certificates accompanied by an appropriate stock power)
with signature guaranties by a bank or trust company or New York Stock
Exchange member firm representing shares of Common Stock having a Fair
Market Value equal to the aggregate exercise price of the shares being
acquired pursuant to this Option, it being understood and agreed that if
this Option is not exercised in whole, the Employee shall be permitted to
deliver shares previously acquired pursuant to prior exercises of this
Option in payment of the exercise price upon a subsequent exercise of this
Option, except that fractional shares shall be paid for in cash, (iii) to
have withheld from the total number of shares of Common Stock to be
acquired upon the exercise of an Option that number of shares having a
Fair Market Value equal to the aggregate exercise price of the shares
being acquired pursuant to this Option, except that fractional shares
shall be paid for in cash, or (iv) any combination of the foregoing.
(d) The Option shall be deemed to have been exercised
with respect to any particular shares of Common Stock if, and only if, the
preceding provisions of this Section 13 and the provisions of Section 14
hereof shall have been complied with, in which event the Option shall be
deemed to have been exercised on the date the notice of exercise of the
Option was received by the Company. Anything in this Agreement to the
contrary notwithstanding, any notice of exercise given pursuant to the
provisions of this Section 13 shall be void and of no effect if all the
preceding provisions of this Section 13 and the provisions of Section 14
shall not have been complied with.
(e) The certificate or certificates for shares of Common
Stock as to which the Option shall be exercised will be registered in the
name of the Employee (or in the name of the Employee's estate or other
beneficiary if the Option is exercised after the
- 6 -
<PAGE> 39
Employee's death), or if the Option is exercised by the Employee
and if the Employee so requests in the notice exercising the Option, will
be registered in the name of the Employee and another person jointly, with
right of survivorship and will be delivered on the Closing Date to the
Employee at the place specified for the closing, but only upon compliance
with all of the provisions of this Agreement.
(f) If the Employee fails to accept delivery of and pay
for all or any part of the number of Shares specified in such notice upon
tender or delivery thereof on the Closing Date, his right to exercise the
Option with respect to such undelivered Shares may be terminated in the
sole discretion of the Board of Directors of the Company. The Option may
be exercised only with respect to full Shares.
(g) The Company shall not be required to issue or
deliver any certificate or certificates for shares of its Common Stock
purchased upon the exercise of any part of this Option prior to the
payment to the Company, upon its demand, of any amount requested by the
Company for the purpose of satisfying its liability, if any, to withhold
state or local income or earnings tax or any other applicable tax or
assessment (plus interest or penalties thereon, if any, caused by a delay
in making such payment) incurred by reason of the exercise of this Option
or the transfer of shares thereupon. Such payment shall be made by the
Employee in cash or, with the consent of the Company, by tendering to the
Company shares of Common Stock equal in value to the amount of the
required withholding. In the alternative, the Company may, at its option,
satisfy such withholding requirements by withholding from the shares of
Common Stock to be delivered to the Employee pursuant to an exercise of
this Option a number of shares of Common Stock equal in value to the
amount of the required withholding.
14. Approval of Counsel. The exercise of the Option and the
issuance and delivery of shares of Common Stock pursuant thereto shall be
subject to approval by the Company's counsel of all legal matters in
connection therewith, including compliance with the requirements of the
Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder, and the
requirements of any stock exchange upon which the Common Stock may then be
listed.
15. Resale of Common Stock. (a) If so requested by the
Company, upon any sale or transfer of the Common Stock purchased upon
exercise of the Option, the Employee shall deliver to the Company an
opinion of counsel satisfactory to the Company to the effect that either
(i) the Common Stock to be sold or transferred has been registered under
the Securities Act of 1933, as amended, and that there is in effect a
current prospectus meeting the requirements of Section 10(a) of said Act
which is being or will be delivered to the purchaser or transferee at or
prior to the time of delivery of the certificates evidencing the Common
Stock to be sold or transferred, or (ii) such Common Stock may then be
sold without violating Section 5 of said Act.
(b) The Common Stock issued upon exercise of the Option
shall be subject to the restrictions set forth in Exhibit B hereto and
shall bear the following legend if required by the Company:
- 7 -
<PAGE> 40
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN A STOCK OPTION AGREEMENT BY
AND BETWEEN THE HOLDER HEREOF AND ENTEX INFORMATION SERVICES,
INC. AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF UNTIL (I) ALL OF SUCH RESTRICTIONS
HAVE EXPIRED OR HAVE BEEN WAIVED BY ENTEX INFORMATION
SERVICES, INC. AND (II) SUCH SHARES HAVE FIRST BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (UNLESS, IN THE
OPINION OF COUNSEL FOR ENTEX INFORMATION SERVICES, INC., SUCH
REGISTRATION IS NOT REQUIRED).
16. Reservation of Shares. The Company shall at all times during the
term of the Option reserve and keep available such number of shares of the class
of stock then subject to the Option as will be sufficient to satisfy the
requirements of this Agreement.
17. Limitation of Action. The Employee and the Company each
acknowledges that every right of action accruing to him or it, as the case may
be, and arising out of or in connection with this Agreement against the Company
or a Parent or Subsidiary, on the one hand, or against the Employee, on the
other hand, shall, irrespective of the place where an action may be brought,
cease and be barred by the expiration of three years from the date of the act or
omission in respect of which such right of action arises.
18. Notices. Each notice relating to this Agreement shall be in
writing and delivered in person or by certified mail to the proper address. All
notices to the Company or the Committee shall be addressed to them at ENTEX
Information Services, Inc., 6 International Drive, Rye Brook, N.Y. 10573, Attn:
Senior Vice President, Human Resources. All notices to the Employee shall be
addressed to the Employee or such other person or persons at the Employee's
address above specified. Anyone to whom a notice may be given under this
Agreement may designate a new address by notice to that effect.
19. Benefits of Agreement. This Agreement shall inure to the benefit
of and be binding upon each successor and assign of the Company. All obligations
imposed upon the Employee and all rights granted to the Company under this
Agreement shall be binding upon the Employee's heirs, legal representatives and
successors.
20. Severability. In the event that any one or more provisions of
this Agreement shall be deemed to be illegal or unenforceable, such illegality
or unenforceability shall not affect the validity and enforceability of the
remaining legal and enforceable provisions hereof, which shall be construed as
if such illegal or unenforceable provision or provisions had not been inserted.
21. Governing Law. This Agreement will be construed and governed in
accordance with the laws of the State of New York, without reference to the
conflict of laws principles thereof.
- 8 -
<PAGE> 41
22. Disposition of Shares. By accepting this Agreement, the Employee
agrees that in the event that he shall dispose (whether by sale, exchange, gift,
or any like transfer) of any shares of Common Stock of the Company (to the
extent such shares are deemed to be purchased pursuant to an incentive stock
option) acquired by him pursuant hereto within two years of the date of grant of
this Option or within one year after the acquisition of such shares pursuant
hereto, he will notify the Company no later than 15 days from the date of such
disposition of the date or dates and the number of shares disposed of by him and
the consideration received, if any, and, upon notification from the Company,
promptly forward to the secretary of the Company any amount requested by the
Company for the purpose of satisfying its liability, if any, to withhold
federal, state or local income or earnings tax or any other applicable tax or
assessment (plus interest or penalties thereon, if any, caused by delay in
making such payment) incurred by reason of such disposition.
23. Acknowledgment of Employee. The Employee represents and agrees
that as of the date of grant of this Option, he does not own (within the meaning
of Section 422(b)(6) of the Code) shares possessing more than 10% of the total
combined voting power of all classes of shares of the Company or of any Parent
or Subsidiary.
24. Employment. Nothing contained in this Agreement shall be
construed as (a) a contract of employment between the Employee and the Company
or any Parent or Subsidiary, (b) as a right of the Employee to be continued in
the employ of the Company or any Parent or Subsidiary, or (c) as a limitation of
the right of the Company or any Parent or Subsidiary to discharge the Employee
at any time, with or without cause.
25. Definitions. Unless otherwise defined herein, all capitalized
terms shall have the same meanings assigned to them in under the Plan.
26. Incorporation of Terms of Plan. This Agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference.
<PAGE> 42
27. Information Concerning Employee and Terms of Option. This
Agreement incorporates the following terms, definitions and information:
(a) Date of Agreement: _______________________________________
(b) Employee: ______________________________________________
(c) Address of Employee: _____________________________________
__________________________________________________________
(d) Employee's Social Security Number: ______________________
(e) Date of Grant (Section 1): _______________________________
(f) Number of Shares of Common Stock subject to Option
(Section 1): ____________________________________________
(g) Purchase Price of each share of Common Stock covered by
Option (Section 2): _____________________________________
(h) Percentage of Fair Market Value (Section 2) [check
applicable percentage] 100%________ 110% _____
(i) Term of Option (Section 4): _____________________________
(j) Permitted Additional methods of Exercise of Option
(Section 13(c) [check all that apply]: (i) shares of
Common Stock ______ (ii) withholding of shares of Common
Stock _______; (iii) combination ______.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in its name by its President or one of its Vice Presidents and the
Employee has hereunto set his hand all as of the date, month and year first
above written.
ENTEX INFORMATION SERVICES, INC.
By:
------------------------------------
Name:
Title:
----------------------------------------
Signature of Employee
- 10 -
<PAGE> 43
EXHIBIT A
INCENTIVE STOCK OPTION EXERCISE FORM
[DATE]
ENTEX Information Services, Inc.
Six International Drive
Rye Brook, New York 10543
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Incentive Stock Option Agreement
dated [ ], whereby you have granted to me an incentive stock option to purchase
[ ] common shares, par value $0.001 per share, of ENTEX Information Services,
Inc. (the "Company"), I hereby notify you that I elect to exercise my option to
purchase ____________________ of the shares covered by such option at the
exercise price specified therein. In full payment of the price for the shares
being purchased hereby, I am delivering to you herewith (a) a check payable to
the order of the Company in the amount of $____________, or (b) a certificate or
certificates for [ ] shares of Common Stock of the Company, and which have a
fair market value as of the date hereof of $_____________, and a check, payable
to the order of the Company, in the amount of $_____________. Any such stock
certificate or certificates are endorsed, or accompanied by an appropriate stock
power, to the order of the Company, with my signature guaranteed by a bank or
trust company or by a member firm of the New York Stock Exchange. [I hereby
acknowledge that I am purchasing these shares of Common Stock for investment
purposes only and not with a view to the resale or distribution thereof.]
Very truly yours,
----------------------------------------
[Address]
(For notices, reports, dividend checks
and other communications to
stockholders.)
- 11 -
<PAGE> 44
EXHIBIT B
RESTRICTIONS
The restrictions set forth below (other than the restrictions
contained in paragraph 1, which shall survive indefinitely) shall apply to all
shares purchased pursuant to this Agreement until the completion by the Company
of a Public Offering:
1. If the employment of the Employee is terminated for Good Cause,
then the Company shall have the right, but not the obligation, to purchase from
such Employee all shares of Common Stock acquired pursuant to this Agreement for
a purchase price equal to the exercise price of the Options pursuant to which
such shares were purchased. The Company shall exercise such right by delivery of
a written notice of exercise to such Employee not later than sixty (60) days
after the date on which the employment of such Employee terminated (the
"Termination Date").
2. If the employment of the Employee is terminated other than by
reason of Disability or Good Cause, then the Company shall have the right, but
not the obligation, to purchase from the Employee or the Employee's legal
representative (or beneficiary) all shares previously acquired pursuant to this
Agreement, including shares acquired pursuant to this Agreement following the
Employee's death, for a purchase price equal to the total Fair Market Value of
such shares of Common Stock in effect on the Termination Date. The Company shall
exercise such right by delivery of a written notice of exercise to the Employee
or his legal representative (or beneficiary) not later than sixty (60) days
after the later of the Termination Date or the date of the exercise by the
Optionee's legal representative of an option pursuant to Section 7(a) of the
Agreement, whichever is applicable.
3. If the employment of the Employee is terminated by reason of
Disability, then the Company shall have the right, but not the obligation, to
purchase only such shares that have been acquired pursuant to this Agreement and
that have been held one (1) year or longer by the Employee for a purchase price
equal to the total Fair Market Value of such shares in effect on the Termination
Date. The Company shall exercise such right by delivery of a written notice of
exercise to the Employee not later than sixty (60) days after the Termination
Date.
4. The Company shall have the right, but not the obligation, to
purchase shares acquired by the Employee prior to the Termination Date and not
acquired by the Company pursuant to paragraph 3 or acquired by the Employee
pursuant to Section 7(b) of the Agreement for a purchase price equal to the
total Fair Market Value of such shares of Common Stock, in effect on the
Termination Date. The Company shall exercise such right by delivery of a written
notice of exercise to the Employee at any time during the period beginning on
the date which is one (1) year after the date of exercise by the Employee and
ending sixty (60) days thereafter.
<PAGE> 45
5. (a) If the Employee desires to sell, assign, encumber, pledge or
otherwise transfer ("Transfer") any shares of Common Stock acquired pursuant to
this Agreement to any person or entity other than the Company ("Third Party"),
except pursuant to a Transfer by the Employee of all or a portion of such shares
to his ancestors, descendants or spouse (other than as an incident to the
dissolution of marriage) (collectively, "Family Donees"), or to one or more
trusts for the benefit of the Employee or any of his Family Donees, either inter
vivos, or, subject to the provisions hereof relating to the death or Disability
of the Employee, pursuant to applicable laws of descent and distribution, if
such Family Donee or such trust agrees in writing to be bound by the terms of
the restrictions contained in this Agreement, such Transfer shall be made only
in accordance with this Agreement and only for cash or cash equivalents.
(b) Upon receipt by the Employee of any bona fide offer to
purchase all or any portion of the shares of Common Stock owned by such
Employee, his Family Donees or trusts for his or their benefit, then the party
proposing to make the Transfer (the "Offering Party") shall deliver written
notice ("Offer Notice") to the Company specifying the name of the Third Party
that is the proposed purchaser of the shares of Common Stock, the number of
shares proposed to be transferred, the price to be paid in the proposed sale and
all other material conditions of the proposed sale. The Offering Party shall
notify the Company of any material changes in the terms of such proposed
Transfer, and such notice shall be treated as an original Offer Notice.
(c) The Company shall have the right, but not the obligation,
to purchase all or any part of the shares of Common Stock offered pursuant to
the Offer Notice for the price and on the terms specified in the Offer Notice by
delivery of a written notice of exercise within sixty (60) days after the
receipt of the Offer Notice.
6. If the Company is unable to exercise the rights granted to it
pursuant to paragraphs 1 through 5 above due to a restriction imposed upon the
Company under the terms of any bank loan or the terms of any instrument or
agreement evidencing any indebtedness or other obligation of the Company or
under an applicable provision of the Delaware General Corporation Law, then the
Company will offer to assign its rights to Cameron by delivery of written notice
of such offer. Cameron shall have the right, but not the obligation, to assign
his rights hereunder to one or more Cameron Affiliates. Cameron and/or the
Cameron Affiliates may exercise the rights of the Company to purchase shares of
Common Stock assigned pursuant to this paragraph 6 by delivery of a written
notice of exercise to the Company and the Employee not later than fifteen (15)
days after delivery by the Company of its offer notice to Cameron. If Cameron
and/or the Cameron Affiliates exercise such rights, then Cameron and/or the
Cameron Affiliates shall purchase such shares of Common Stock from the Employee
and/or his legal representative on the same terms and subject to the same
conditions as are applicable to the Company under this Agreement. If Cameron
and/or the Cameron Affiliates do not exercise their rights under this paragraph
6, then the rights and obligations of the Company under paragraphs 1 through 5
above shall be deemed to have been satisfied.
7. The closing of any purchase pursuant to the exercise of any of
the foregoing rights shall occur not later than thirty (30) days after the
delivery of the notice of
- 2 -
<PAGE> 46
exercise by the Company, Cameron or the Cameron Affiliates, as the case may be,
at the principal executive offices of the Company, unless the purchaser
otherwise agrees, and at a time agreed upon by the Employee or his legal
representative and the purchaser. At such closing, the purchaser shall pay to
the Employee or his legal representative or the Offering Party, as the case may
be, the total purchase price for the shares being purchased by check, payable to
the order of the Employee or his legal representative or the Offering Party, as
the case may be, against delivery by the Employee or his legal representative or
the Offering Party, as the case may be, of a certificate or certificates
representing all of the shares being purchased, together with a stock power duly
executed in blank with signature guaranteed, free and clear of all liens,
claims, charges and encumbrances.
- 3 -
<PAGE> 1
Exhibit 10.10
ENTEX INFORMATION SERVICES, INC.
- --------------------------------------------------------------------------------
1996 PERFORMANCE INCENTIVE PLAN
- --------------------------------------------------------------------------------
As adopted August 15, 1996
<PAGE> 2
ENTEX INFORMATION SERVICES, INC.
- --------------------------------------------------------------------------------
1996 PERFORMANCE INCENTIVE PLAN
- --------------------------------------------------------------------------------
PAGE
----
1. Purpose.................................................................. 1
2. Definitions.............................................................. 1
3. Administration........................................................... 3
(a) Authority of the Committee.......................................... 3
(b) Manner of Exercise of Committee Authority........................... 3
(c) Limitation of Liability............................................. 4
4. Stock Subject to Plan.................................................... 4
(a) Overall Number of Shares Available for Delivery..................... 4
(b) Application of Limitation to Grants of Awards....................... 4
(c) Availability of Shares Not Delivered under Awards .................. 4
5. Eligibility; Per-Person Award Limitations................................ 5
6. Specific Terms of Awards................................................. 5
(a) General............................................................. 5
(b) Options............................................................. 5
(c) Stock Appreciation Rights........................................... 6
(d) Restricted Stock.................................................... 6
(e) Deferred Stock...................................................... 7
(f) Bonus Stock and Awards in Lieu of Obligations....................... 8
(g) Dividend Equivalents................................................ 8
(h) Other Stock-Based Awards............................................ 8
7. Certain Provisions Applicable to Awards.................................. 9
(a) Stand-Alone, Additional, Tandem, and Substitute Awards ............. 9
(b) Term of Awards...................................................... 9
(c) Form and Timing of Payment under Awards; Deferrals ................. 9
(d) Exemptions from Section 16(b) Liability............................. 9
(e) Cancellation and Rescission of Awards...............................10
8. Performance and Annual Incentive Awards..................................11
(a) Performance Conditions..............................................11
(b) Performance Awards Granted to Designated Covered Employees .........11
(c) Annual Incentive Awards Granted to Designated Covered Employees.....12
(d) Written Determinations..............................................13
(e) Status of Section 8(b) and 8(c) Awards under Code Section 162(m) ...14
<PAGE> 3
ENTEX INFORMATION SERVICES, INC.
- --------------------------------------------------------------------------------
1996 PERFORMANCE INCENTIVE PLAN
- -------------------------------------------------------------------------------
PAGE
----
9. General Provisions...................................................... 14
(a) Compliance with Legal and Other Requirements....................... 14
(b) Limits on Transferability; Beneficiaries........................... 14
(c) Adjustments........................................................ 15
(d) Taxes.............................................................. 15
(e) Changes to the Plan and Awards..................................... 16
(f) Limitation on Rights Conferred under Plan.......................... 16
(g) Unfunded Status of Awards; Creation of Trusts...................... 16
(h) Nonexclusivity of the Plan......................................... 17
(i) Payments in the Event of Forfeitures; Fractional Shares ........... 17
(j) Governing Law...................................................... 17
(k) Awards under Preexisting Plan...................................... 17
(l) Plan Effective Date and Stockholder Approval....................... 17
<PAGE> 4
ENTEX INFORMATION SERVICES, INC.
1996 PERFORMANCE INCENTIVE PLAN
1. PURPOSE. The purpose of this 1996 Performance Incentive Plan (the
"Plan") is to assist ENTEX Information Services, Inc., a Delaware corporation
(the "Company"), and its subsidiaries in attracting, retaining, and rewarding
high-quality executives, employees, and other persons who provide services to
the Company and/or its subsidiaries, enabling such persons to acquire or
increase a proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the Company's stockholders, and
providing such persons with annual and long-term performance incentives to
expend their maximum efforts in the creation of shareholder value. The Plan is
also intended to qualify certain compensation awarded under the Plan for tax
deductibility under Code Section 162(m) (as hereafter defined) to the extent
deemed appropriate by the Committee (or any successor committee) of the Board of
Directors of the Company.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or
other Award, unless otherwise determined by the Committee, after the end
of a specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or
Annual Incentive Award, together with any other right or interest granted
to a Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards
or other rights are transferred if and to the extent permitted under
Section 9(b) hereof. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means person, persons, trust or trusts entitled by will or the
laws of descent and distribution to receive such benefits.
(d) "Board" means the Company's Board of Directors.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions
and regulations thereto.
(f) "Committee" means a committee of two or more directors designated
by the Board to administer the Plan; provided, however, that, unless
otherwise determined by the Board, the Committee shall consist solely of
two or more directors, each of whom shall be (i) a "non-employee director"
within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by "non-employee directors" is not then
required in order for exemptions under Rule 16b-3 to apply to transactions
under the Plan, and (ii) an "outside director" as defined under Code
Section 162(m), unless administration of the Plan by "outside
- 1 -
<PAGE> 5
directors" is not then required in order to qualify for tax deductibility
under Code Section 162(m).
(g) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.
(h) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.
(i) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g), to receive cash, Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of
shares of Stock, or other periodic payments.
(j) "Effective Date" means August 15, 1996, the effective date of the
Plan.
(k) "Eligible Person" means each Executive Officer and other officers
and employees of the Company or of any subsidiary, including such persons
who may also be directors of the Company, and each other person who
provides services to the Company and/or its subsidiaries. An employee on
leave of absence may be considered as still in the employ of the Company
or a subsidiary for purposes of eligibility for participation in the Plan.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(m) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.
(n) "Fair Market Value" means the fair market value of Stock, Awards
or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the
Committee, the Fair Market Value of Stock as of any given date shall be
the closing sale price per share reported on a consolidated basis for
Stock listed on the principal stock exchange or market on which Stock is
traded on the date as of which such value is being determined or, if there
is no sale on that date, then on the last previous day on which a sale was
reported.
(o) "Incentive Stock Option" or "ISO" means any Option intended to be
and designated as an incentive stock option within the meaning of Code
Section 422 or any successor provision thereto.
(p) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(q) "Option" means a right, granted to a Participant under Section
6(b) hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
(r) "Other Stock Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(s) "Participant" means a person who has been granted an Award under
the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
- 2 -
<PAGE> 6
(t) "Performance Award" means a right, granted to a Participant under
Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee.
(u) "Preexisting Plans" mean the ENTEX Holdings, Inc. 1996 Stock
Option Plan and the ENTEX Information Services, Inc. 1996 Stock Option
Plan.
(v) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(w) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(x) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 9(c) hereof.
(y) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
3. ADMINISTRATION.
(a) Authority of the Committee. The Plan shall be administered by the
Committee except to the extent the Board elects to administer the Plan, in
which case references herein to the "Committee" shall be deemed to include
references to the "Board". The Committee shall have full and final
authority, in each case subject to and consistent with the provisions of
the Plan, to select Eligible Persons to become Participants, grant Awards,
determine the type, number and other terms and conditions of, and all
other matters relating to, Awards, prescribe Award agreements (which need
not be identical for each Participant) and rules and regulations for the
administration of the Plan, construe and interpret the Plan and Award
agreements and correct defects, supply omissions or reconcile
inconsistencies therein, and to make all other decisions and
determinations as the Committee may deem necessary or advisable for the
administration of the Plan.
(b) Manner of Exercise of Committee Authority. Any action of the
Committee shall be final, conclusive and binding on all persons, including
the Company, its subsidiaries, Participants, Beneficiaries, transferees
under Section 9(b) hereof or other persons claiming rights from or through
a Participant, and stockholders. The express grant of any specific power
to the Committee, and the taking of any action by the Committee, shall not
be construed as limiting any power or authority of the Committee. The
Committee may delegate to officers or managers of the Company or any
subsidiary, or committees thereof, the authority, subject to such terms as
the Committee shall determine, (i) to perform administrative functions,
(ii) with respect to Participants not subject to Section 16 of the
Exchange Act, to perform such other functions as the Committee may
determine, and (iii) with respect to Participants subject to Section 16,
to perform such other functions of the Committee as the Committee may
determine to the extent performance of such functions will not result in
the loss of an exemption under Rule 16b-3 otherwise available for
transactions by such persons, in each case to the extent permitted under
applicable law and subject to the requirements set forth in Section 8(d).
The Committee may appoint agents to assist it in administering the Plan.
- 3 -
<PAGE> 7
(c) Limitation of Liability. The Committee and each member thereof
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any executive officer, other
officer or employee of the Company or a subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and any officer or
employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee shall not be personally liable for any action or
determination taken or made in good faith with respect to the Plan, and
shall, to the extent permitted by law, be fully indemnified and protected
by the Company with respect to any such action or determination.
4. STOCK SUBJECT TO PLAN.
(a) Overall Number of Shares Available for Delivery. Subject to
adjustment as provided in Section 9(c) hereof, the total number of shares
of Stock reserved and available for delivery in connection with Awards
under the Plan shall be (i) 878,000, plus (ii) shares subject to awards
under Preexisting Plans which become available after the Effective Date in
accordance with Section 4(c) hereof. Any shares of Stock delivered under
the Plan may consist, in whole or in part, of authorized and unissued
shares or treasury shares.
(b) Application of Limitation to Grants of Awards. No Award may be
granted if the number of shares of Stock to be delivered in connection
with such Award or, in the case of an Award relating to shares of Stock
but settleable only in cash (such as cash-only SARs), the number of shares
to which such Award relates, exceeds the number of shares of Stock
remaining available under the Plan minus the number of shares of Stock
issuable in settlement of or relating to then-outstanding Awards. The
Committee may adopt reasonable counting procedures to ensure appropriate
counting, avoid double counting (as, for example, in the case of tandem or
substitute awards) and make adjustments if the number of shares of Stock
actually delivered differs from the number of shares previously counted in
connection with an Award.
(c) Availability of Shares Not Delivered under Awards. Shares of
Stock subject to an Award under the Plan or award under a Preexisting Plan
that is canceled, expired, forfeited, settled in cash or otherwise
terminated without a delivery of shares to the Participant, including (i)
the number of shares withheld in payment of any exercise or purchase price
of an Award or award or taxes relating to Awards or awards, and (ii) the
number of shares surrendered in payment of any exercise or purchase price
of an Award or award or taxes relating to any Award or award, will again
be available for Awards under the Plan, except that if any such shares
could not again be available for Awards to a particular Participant under
any applicable law or regulation, such shares shall be available
exclusively for Awards to Participants who are not subject to such
limitation.
5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year during any part of which
the Plan is in effect, an Eligible Person may not be granted Awards relating to
more than 100,000 shares of Stock, subject to adjustment as provided in Section
9(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h), 8(b) and
8(c). In addition, the maximum cash amount that may be earned under the Plan as
a final Annual Incentive Award or other cash annual Award in respect of any
fiscal year by any one Participant shall be $2 million, and the maximum cash
amount that may be earned under the Plan as a final Performance Award or other
cash Award in respect of a performance period by any one Participant shall be $4
million.
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<PAGE> 8
6. SPECIFIC TERMS OF AWARDS.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any
Award or the exercise thereof, at the date of grant or thereafter (subject
to Section 9(e)), such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall determine,
including terms requiring forfeiture of Awards in the event of termination
of employment by the Participant and terms permitting a Participant to
make elections relating to his or her Award. The Committee shall retain
full power and discretion to accelerate, waive or modify, at any time, any
term or condition of an Award that is not mandatory under the Plan. Except
in cases in which the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of
consideration must by paid to satisfy the requirements of the Delaware
General Corporation Law, no consideration other than services may be
required for the grant (but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee,
provided that such exercise price shall be not less than the Fair
Market Value of a share of Stock on the date of grant of such Option
except as provided under Section 7(a) hereof.
(ii) Time and Method of Exercise. The Committee shall determine
the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the methods by
which such exercise price may be paid or deemed to be paid, the form of
such payment, including, without limitation, cash, Stock, other Awards
or awards granted under other plans of the Company or any subsidiary,
or other property (including notes or other contractual obligations of
Participants to make payment on a deferred basis), and the methods by
or forms in which Stock will be delivered or deemed to be delivered to
Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Code Section 422.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to ISOs (including any SAR in tandem therewith) shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either the
Plan or any ISO under Code Section 422, unless the Participant has
first requested the change that will result in such disqualification.
(c) Stock Appreciation Rights. The Committee is authorized to grant
SAR's to Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of Stock on the date
of exercise (or, in the case of a "Limited SAR," the Fair Market Value
determined at the time of a change in control or other event specified
by the Committee), over (B) the grant price of the SAR as determined by
the Committee.
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<PAGE> 9
(ii) Other Terms. The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances
under which a SAR may be exercised in whole or in part (including based
on achievement of performance goals and/or future service
requirements), the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock
will be delivered or deemed to be delivered to Participants, whether or
not a SAR shall be in tandem or in combination with any other Award,
and any other terms and conditions of any SAR. Limited SARs that may
only be exercised in connection with a change in control or other event
as specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may determine.
SARs and Limited SARs may be either freestanding or in tandem with
other Awards.
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions
may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or otherwise,
as the Committee may determine at the date of grant or thereafter.
Except to the extent restricted under the terms of the Plan and any
Award agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee). During the restricted
period applicable to the Restricted Stock, subject to Section 9(b)
below, the Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions
shall be forfeited and reacquired by the Company; provided that the
Committee may provide, by rule or regulation or in any Award agreement,
or may determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Stock shall be waived in
whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part
the forfeiture of Restricted Stock.
(iii)Certificates for Stock. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in the
name of the Participant, the Committee may require that such
certificates bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock, that
the Company retain physical possession of the certificates, and that
the Participant deliver a stock power to the Company, endorsed in
blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an Award
of Restricted Stock, the Committee may require that any cash dividends
paid on a share of Restricted Stock be automatically reinvested in
additional shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined by the
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Committee, Stock distributed in connection with a Stock split or
Stock dividend, and other property distributed as a dividend, shall
be subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Stock or
other property has been distributed.
(e) Deferred Stock. The Committee is authorized to grant Deferred
Stock to Participants, which are rights to receive Stock, cash, or a
combination thereof at the end of a specified deferral period, subject to
the following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of Deferred
Stock shall occur upon expiration of the deferral period specified for
such Deferred Stock by the Committee (or, if permitted by the
Committee, as elected by the Participant). In addition, Deferred Stock
shall be subject to such restrictions (which may include a risk of
forfeiture) as the Committee may impose, if any, which restrictions may
lapse at the expiration of the deferral period or at earlier specified
times (including based on achievement of performance goals and/or
future service requirements), separately or in combination, in
installments or otherwise, as the Committee may determine. Deferred
Stock may be satisfied by delivery of Stock, cash equal to the Fair
Market Value of the specified number of shares of Stock covered by the
Deferred Stock, or a combination thereof, as determined by the
Committee at the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment during the applicable deferral period or
portion thereof to which forfeiture conditions apply (as provided in
the Award agreement evidencing the Deferred Stock), all Deferred Stock
that is at that time subject to deferral (other than a deferral at the
election of the Participant) shall be forfeited; provided that the
Committee may provide, by rule or regulation or in any Award agreement,
or may determine in any individual case, that restrictions or
forfeiture conditions relating to Deferred Stock shall be waived in
whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part
the forfeiture of Deferred Stock.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee at date of grant, Dividend Equivalents on the specified
number of shares of Stock covered by an Award of Deferred Stock shall
be either (A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends, or (B) deferred
with respect to such Deferred Stock and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock, other
Awards or other investment vehicles, as the Committee shall determine
or permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in
lieu of Company obligations to pay cash or deliver other property under
the Plan or under other plans or compensatory arrangements, provided that,
in the case of Participants subject to Section 16 of the Exchange Act, the
amount of such grants remains within the discretion of the Committee to
the extent necessary to ensure that acquisitions of Stock or other Awards
are exempt from liability under Section 16(b) of the Exchange Act. Stock
or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee.
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<PAGE> 11
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant, entitling the Participant to
receive cash, Stock, other Awards, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock, or
other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee may
provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock,
Awards, or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part
by reference to, or otherwise based on, or related to, Stock, as deemed by
the Committee to be consistent with the purposes of the Plan, including,
without limitation, convertible or exchangeable debt securities, other
rights convertible or exchangeable into Stock, purchase rights for Stock,
Awards with value and payment contingent upon performance of the Company
or any other factors designated by the Committee, and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified subsidiaries. The Committee shall determine the
terms and conditions of such Awards. Stock delivered pursuant to an Award
in the nature of a purchase right granted under this Section 6(h) shall be
purchased for such consideration, paid for at such times, by such methods,
and in such forms, including, without limitation, cash, Stock, other
Awards, or other property, as the Committee shall determine. Cash awards,
as an element of or supplement to any other Award under the Plan, may also
be granted pursuant to this Section 6(h).
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of
the Company, any subsidiary, or any business entity to be acquired by the
Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award or award, the
Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be
granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any subsidiary, in which the
value of Stock subject to the Award is equivalent in value to the cash
compensation (for example, Deferred Stock or Restricted Stock), or in
which the exercise price, grant price or purchase price of the Award in
the nature of a right that may be exercised is equal to the Fair Market
Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price
"discounted" by the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided that in no event shall the
term of any Option or SAR exceed a period of ten years (or such shorter
term as may be required in respect of an ISO under Code Section 422).
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<PAGE> 12
(c) Form and Timing of Payment under Awards; Deferrals. Subject to
the terms of the Plan and any applicable Award agreement, payments to be
made by the Company or a subsidiary upon the exercise of an Option or
other Award or settlement of an Award may be made in such forms as the
Committee shall determine, including, without limitation, cash, Stock,
other Awards or other property, and may be made in a single payment or
transfer, in installments, or on a deferred basis. The settlement of any
Award may be accelerated, and cash paid in lieu of Stock in connection
with such settlement, in the discretion of the Committee or upon
occurrence of one or more specified events. Installment or deferred
payments may be required by the Committee (subject to Section 9(e) of the
Plan, including the consent provisions thereof in the case of any deferral
of an outstanding Award not provided for in the original Award agreement)
or permitted at the election of the Participant on terms and conditions
established by the Committee. Payments may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred
payments denominated in Stock.
(d) Exemptions from Section 16(b) Liability. It is the intent of the
Company that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be
exempt under Rule 16b-3 (except for transactions acknowledged in writing
to be non-exempt by such Participant). Accordingly, if any provision of
this Plan or any Award agreement does not comply with the requirements of
Rule 16b-3 as then applicable to any such transaction, such provision
shall be construed or deemed amended to the extent necessary to conform to
the applicable requirements of Rule 16b-3 so that such Participant shall
avoid liability under Section 16(b).
(e) Cancellation and Rescission of Awards. Unless the Award agreement
specifies otherwise, the Committee may cancel any unexpired, unpaid, or
deferred Awards at any time, and the Company shall have the additional
rights set forth in Section 7(e)(iv) below, if the Participant is not in
compliance with all applicable provisions of the Award agreement and the
Plan including the following conditions:
(i) A Participant shall not render services for any organization
or engage directly or indirectly in any business which, in the judgment
of the Chief Executive Officer of the Company or other senior officer
designated by the Committee, is or becomes competitive with the
Company. For Participants whose employment has terminated, the judgment
of the Chief Executive Officer or other senior officer designated by
the Committee shall be based on the Participant's position and
responsibilities while employed by the Company, the Participant's
post-employment responsibilities and position with the other
organization or business, the extent of past, current and potential
competition or conflict between the Company and the other organization
or business, the effect on the Company's stockholders, customers,
suppliers and competitors of the Participant assuming the
post-employment position and such other considerations as are deemed
relevant given the applicable facts and circumstances. A Participant
who has terminated employment shall be free, however, to purchase as an
investment or otherwise, stock or other securities of such organization
or business so long as they are listed upon a recognized securities
exchange or traded over-the-counter, and such investment does not
represent a greater than five percent equity interest in the
organization or business. For purposes of this Section 7(e)(i), an
organization shall be considered to be competitive with the Company if
it is engaged directly or indirectly in the business of providing
information technology services or products, including, without
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<PAGE> 13
limitation, AmeriData Technologies, Inc., CompuCom Systems, Inc.,
DecisionOne Corporation, InaCom Corp., Intelligent Electronics, Inc.,
MicroAge, Inc., Vanstar Corporation, and their successors.
(ii) A Participant shall not, without prior written authorization
from the Company, disclose to anyone outside the Company, or use in
other than the Company's business, any confidential information or
material relating to the business of the Company that is acquired by
the Participant either during or after employment with the Company.
(iii) A Participant shall disclose promptly and assign to the
Company all right, title, and interest in any invention or idea,
patentable or not, made or conceived by the Participant during
employment by the Company, relating in any manner to the actual or
anticipated business, research or development work of the Company and
shall do anything reasonably necessary to enable the Company to secure
a patent where appropriate in the United States and in foreign
countries.
(iv) Upon exercise, settlement, payment or delivery pursuant to an
Award, the Participant shall certify on a form acceptable to the
Committee that he or she is in compliance with the terms and conditions
of the Plan. Failure to comply with the provisions of this Section 7(e)
prior to, or during the six months after, any exercise, payment or
delivery pursuant to an Award shall cause such exercise, payment or
delivery to be rescinded. The Company shall notify the Participant in
writing of any such rescission within two years after such exercise,
payment or delivery. Within ten days after receiving such a notice from
the Company, the Participant shall pay to the Company the amount of any
gain realized or payment received as a result of the rescinded
exercise, payment or delivery pursuant to an Award. Such payment shall
be made either in cash or by returning to the Company the number of
shares of Stock that the Participant received in connection with the
rescinded exercise, payment or delivery.
8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures
of performance as it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to reduce or increase the
amounts payable under any Award subject to performance conditions, except
as limited under Sections 8(b) and 8(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. If
the Committee determines that a Performance Award to be granted to an
Eligible Person who is designated by the Committee as likely to be a
Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of
such Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section
8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee
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consistent with this Section 8(b). Performance goals shall be
objective and shall otherwise meet the requirements of Code Section
162(m) and regulations thereunder (including Regulation 1.162-27 and
successor regulations thereto), including the requirement that the
level or levels of performance targeted by the Committee result in the
achievement of performance goals being "substantially uncertain." The
Committee may determine that such Performance Awards shall be granted,
exercised and/or settled upon achievement of any one performance goal
or that two or more of the performance goals must be achieved as a
condition to grant, exercise and/or settlement of such Performance
Awards. Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or for specified
subsidiaries or business units of the Company (except with respect to
the total stockholder return and earnings per share criteria), shall be
used by the Committee in establishing performance goals for such
Performance Awards: (1) earnings per share; (2) revenues; (3) cash
flow; (4) cash flow return on investment; (5) return on assets, return
on investment, return on capital, return on equity; (6) economic value
added; (7) operating margin; (8) net income; pretax earnings; pretax
earnings before interest, depreciation and amortization; pretax
operating earnings after interest expense and before incentives,
service fees, and extraordinary or special items; operating earnings;
(9) total stockholder return; and (10) any of the above goals as
compared to the performance of a published or special index deemed
applicable by the Committee including, but not limited to, the Standard
& Poor's 500 Stock Index, the Standard & Poor's Smallcap 600 Index, or
the Russell 2000 Technology Index. One or more of the foregoing
business criteria shall also be exclusively used in establishing
performance goals for Annual Incentive Awards granted to a Covered
Employee under Section 8(c) hereof.
(iii)Performance Period; Timing for Establishing Performance
Goals. Achievement of performance goals in respect of such Performance
Awards shall be measured over a performance period of up to ten years,
as specified by the Committee. Performance goals shall be established
not later than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date as may be
required or permitted for "performance-based compensation" under Code
Section 162(m).
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes
of measuring Company performance in connection with Performance Awards.
The amount of such Performance Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance with
Section 8(b)(iii) hereof. The Committee may specify the amount of the
Performance Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship
to such business criteria.
(v) Settlement of Performance Awards; Other Terms. Settlement of
such Performance Awards shall be in cash, Stock, other Awards or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount
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of a settlement otherwise to be made in connection with such
Performance Awards, but may not exercise discretion to increase any
such amount payable to a Covered Employee in respect of a Performance
Award subject to this Section 8(b). The Committee shall specify the
circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or settlement of
Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered Employees.
If the Committee determines that an Annual Incentive Award to be granted
to an Eligible Person who is designated by the Committee as likely to be a
Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of
such Annual Incentive Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section
8(c).
(i) Annual Incentive Award Pool. The Committee may establish an
Annual Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive Award pool shall
be based upon the achievement of a performance goal or goals based on
one or more of the business criteria set forth in Section 8(b)(ii)
hereof during the given performance period, as specified by the
Committee in accordance with Section 8(b)(iii) hereof. The Committee
may specify the amount of the Annual Incentive Award pool as a
percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear
a strictly mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later than the end of
the 90th day of each fiscal year, or at such other date as may be
required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual Annual
Incentive Awards intended to qualify under Code Section 162(m), the
amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria
set forth in Section 8(b)(ii) hereof in the given performance year, as
specified by the Committee; in other cases, such amount shall be based
on such criteria as shall be established by the Committee. In all
cases, the maximum Annual Incentive Award of any Participant shall be
subject to the limitation set forth in Section 5 hereof.
(iii) Payout of Annual Incentive Awards. After the end of each
fiscal year, the Committee shall determine the amount, if any, of (A)
the Annual Incentive Award pool, and the maximum amount of potential
Annual Incentive Award payable to each Participant in the Annual
Incentive Award pool, or (B) the amount of potential Annual Incentive
Award otherwise payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any Participant as a
final Annual Incentive Award shall be increased or reduced from the
amount of his or her potential Annual Incentive Award, including a
determination to make no final Award whatsoever, but may not exercise
discretion to increase any such amount in the case of an Annual
Incentive Award intended to qualify under Code Section 162(m). The
Committee shall
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specify the circumstances in which an Annual Incentive Award shall be
paid or forfeited in the event of termination of employment by the
Participant prior to the end of a fiscal year or settlement of such
Annual Incentive Award.
(d) Written Determinations. All determinations by the Committee as to
the establishment of performance goals, the amount of any Performance
Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under
Section 8(b), and the amount of any Annual Incentive Award pool or
potential individual Annual Incentive Awards and the amount of final
Annual Incentive Awards under Section 8(c), shall be made in writing in
the case of any Award intended to qualify under Code Section 162(m). The
Committee may not delegate any responsibility relating to such Performance
Awards or Annual Incentive Awards.
(e) Status of Section 8(b) and Section 8(c) Awards under Code Section
162(m). It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Sections 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees
within the meaning of Code Section 162(m) and regulations thereunder
(including Regulation 1.162-27 and successor regulations thereto) shall,
if so designated by the Committee, constitute "performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e),
including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section
162(m) and regulations thereunder. The foregoing notwithstanding, because
the Committee cannot determine with certainty whether a given Participant
will be a Covered Employee with respect to a fiscal year that has not yet
been completed, the term Covered Employee as used herein shall mean only a
person designated by the Committee, at the time of grant of Performance
Awards or an Annual Incentive Award, as likely to be a Covered Employee
with respect to that fiscal year. If any provision of the Plan as in
effect on the date of adoption or any agreements relating to Performance
Awards or Annual Incentive Awards that are designated as intended to
comply with Code Section 162(m) does not comply or is inconsistent with
the requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.
9. GENERAL PROVISIONS.
(a) Compliance with Legal and Other Requirements. The Company may, to
the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award
until completion of such registration or qualification of such Stock or
other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or
automated quotation system upon which the Stock or other Company
securities are listed or quoted, or compliance with any other obligation
of the Company, as the Committee may consider appropriate, and may require
any Participant to make such representations, furnish such information and
comply with or be subject to such other conditions as it may consider
appropriate in connection with the issuance or delivery of Stock or
payment of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations.
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<PAGE> 17
(b) Limits on Transferability; Beneficiaries. No Award or other right
or interest of a Participant under the Plan shall be pledged, hypothecated
or otherwise encumbered or subject to any lien, obligation or liability of
such Participant to any party (other than the Company or a subsidiary), or
assigned or transferred by such Participant otherwise than by will or the
laws of descent and distribution or to a Beneficiary upon the death of a
Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant
or his or her guardian or legal representative, except that Awards and
other rights (other than ISOs and SARs in tandem therewith) may be
transferred to one or more Beneficiaries or other transferees during the
lifetime of the Participant, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the extent
such transfers are permitted by the Committee pursuant to the express
terms of an Award agreement (subject to any terms and conditions which the
Committee may impose thereon). A Beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall
be subject to all terms and conditions of the Plan and any Award agreement
applicable to such Participant, except as otherwise determined by the
Committee, and to any additional terms and conditions deemed necessary or
appropriate by the Committee.
(c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that an
adjustment is determined by the Committee to be appropriate under the
Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of shares of Stock which may
be delivered in connection with Awards granted thereafter, (ii) the number
and kind of shares of Stock by which annual per-person Award limitations
are measured under Section 5 hereof, (iii) the number and kind of shares
of Stock subject to or deliverable in respect of outstanding Awards and
(iv) the exercise price, grant price or purchase price relating to any
Award and/or make provision for payment of cash or other property in
respect of any outstanding Award. In addition, the Committee is authorized
to make adjustments in the terms and conditions of, and the criteria
included in, Awards (including Performance Awards and performance goals,
and Annual Incentive Awards and any Annual Incentive Award pool or
performance goals relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, events described in
the preceding sentence, as well as acquisitions and dispositions of
businesses and assets) affecting the Company, any subsidiary or any
business unit, or the financial statements of the Company or any
subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or
in view of the Committee's assessment of the business strategy of the
Company, any subsidiary or business unit thereof, performance of
comparable organizations, economic and business conditions, personal
performance of a Participant, and any other circumstances deemed relevant;
provided that no such adjustment shall be authorized or made if and to the
extent that such authority or the making of such adjustment would cause
Options, SARs, Performance Awards granted under Section 8(b) hereof or
Annual Incentive Awards granted under Section 8(c) hereof to Participants
designated by the Committee as Covered Employees and intended to qualify
as "performance-based compensation" under Code Section 162(m) and
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.
- 14 -
<PAGE> 18
(d) Taxes. The Company and any subsidiary is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take
such other action as the Committee may deem advisable to enable the
Company and Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Award. This
authority shall include authority to withhold or receive Stock or other
property and to make cash payments in respect thereof in satisfaction of a
Participant's tax obligations, either on a mandatory or elective basis in
the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the
annual meeting next following such Board action if such stockholder
approval is required by any federal or state law or regulation or the
rules of any stock exchange or automated quotation system on which the
Stock may then be listed or quoted, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan to
stockholders for approval; provided that, without the consent of an
affected Participant, no such Board action may materially and adversely
affect the rights of such Participant under any previously granted and
outstanding Award. The Committee may waive any conditions or rights under,
or amend, alter, suspend, discontinue or terminate any Award theretofore
granted and any Award agreement relating thereto, except as otherwise
provided in the Plan; provided that, without the consent of an affected
Participant, no such Committee action may materially and adversely affect
the rights of such Participant under such Award. Notwithstanding anything
in the Plan to the contrary, if any right under this Plan would cause a
transaction to be ineligible for pooling of interest accounting that
would, but for the right hereunder, be eligible for such accounting
treatment, the Committee may modify or adjust the right so that pooling of
interest accounting shall be available, including the substitution of
Stock having a Fair Market Value equal to the cash otherwise payable
hereunder for the right which caused the transaction to be ineligible for
pooling of interest accounting.
(f) Limitation on Rights Conferred under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible
Person or Participant the right to continue as an Eligible Person or
Participant or in the employ or service of the Company or a subsidiary,
(ii) interfering in any way with the right of the Company or a subsidiary
to terminate any Eligible Person's or Participant's employment or service
at any time, (iii) giving an Eligible Person or Participant any claim to
be granted any Award under the Plan or to be treated uniformly with other
Participants and employees, or (iv) conferring on a Participant any of the
rights of a stockholder of the Company unless and until the Participant is
duly issued or transferred shares of Stock in accordance with the terms of
an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
or obligation to deliver Stock pursuant to an Award, nothing contained in
the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided that the
Committee may authorize the creation of trusts and deposit therein cash,
Stock, other Awards or other property, or make other arrangements to meet
the Company's obligations under the Plan. Such trusts or other
- 15 -
<PAGE> 19
arrangements shall be consistent with the "unfunded" status of the
Plan unless the Committee otherwise determines with the consent of each
affected Participant. The trustee of such trusts may be authorized to
dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee may
specify and in accordance with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of
the Board or a committee thereof to adopt such other incentive
arrangements as it may deem desirable including incentive arrangements and
awards which do not qualify under Code Section 162(m).
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or
other consideration. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards or other property shall be issued or paid in
lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction and effect of the Plan,
any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the Delaware General Corporation Law,
without giving effect to principles of conflicts of laws, and applicable
federal law.
(k) Awards under Preexisting Plans. Upon approval of the Plan by
stockholders of the Company, as required under Section 9(l) hereof, no
further Awards shall be granted under the Preexisting Plans.
(l) Plan Effective Date and Stockholder Approval. The Plan has been
adopted by the Board with the consent of the stockholders of the Company
and shall become effective on August 15, 1996.
- 16 -
<PAGE> 20
ENTEX INFORMATION SERVICES, INC.
INCENTIVE STOCK OPTION GRANT
THIS INCENTIVE STOCK OPTION GRANT (the "Grant") is made as of
___________ (the "Grant Date") by ENTEX Information Services, Inc., a Delaware
corporation (the "Company") to _____________________ (the "Optionee") pursuant
to the ENTEX Information Services, Inc. 1996 Performance Incentive Plan (the
"Plan"). Capitalized terms not defined in this Grant shall have the meanings set
forth in the Plan.
1. Award of Options. The Company hereby awards to the Optionee an
option (the "Option" or "Options") to acquire _____ shares of Company common
stock (the "Stock") at the exercise price of $_____ per share (the "Exercise
Price"), subject to the terms and conditions set forth in this Grant and the
Plan (including Section 7(e) of the Plan, which gives the Committee the power to
cancel this Option and/or demand rescission of any exercise of this Option in
the event of the Optionee's failure to comply with certain noncompetition,
confidentiality and intellectual property covenants contained therein). In the
event of a conflict between the terms of this Grant and the Plan, the Plan shall
control. The Options granted hereunder are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code to
the maximum extent permitted by law.
2. Vesting Schedule. Subject to Section 6 hereof, the Options
shall vest and become exercisable at the rate of 20% per year from and after
each anniversary of __________, 199__ (the "Vesting Commencement Date"). Any
acceleration of vesting due to death, Disability, change in control or otherwise
shall be at the sole discretion of the Committee.
3. Expiration Date. Subject to Section 6 hereof, the Options
shall expire on ____________ (the "Expiration Date").
4. Exercise of Options. To the extent vested, the Options may be
exercised from time to time by the giving of written notice of exercise to the
Company in the form attached hereto as Exhibit A, specifying the number of
shares to be purchased. The Exercise Price shall be tendered to the Company at
the time of exercise in cash or in Stock or in such other consideration as shall
be permitted by the Committee at the time of exercise, in each case having a
total Fair Market Value determined as of the date of exercise equal to the
Exercise Price, or a combination of cash, Stock and such other consideration
having a total Fair Market Value equal to such Exercise Price. If requested by
the Company at the time of any exercise, the Optionee agrees as a condition to
such exercise to provide the Company with a representation that it is the
Optionee's intention at the time of such exercise to acquire the shares being
purchased for his or her own account for investment and not with a view to, or
for resale in connection with, the distribution thereof within the meaning of
the Securities Act of 1933. The Stock issued upon exercise of the Option shall
bear the following legend if required by the Company:
- 1 -
<PAGE> 21
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN AN INCENTIVE
STOCK OPTION GRANT MADE TO THE HOLDER HEREOF BY ENTEX
INFORMATION SERVICES, INC. AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNTIL (I) ALL OF SUCH RESTRICTIONS HAVE EXPIRED OR HAVE
BEEN WAIVED BY ENTEX INFORMATION SERVICES, INC. AND (II)
SUCH SHARES HAVE FIRST BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (UNLESS, IN THE OPINION
OF COUNSEL FOR ENTEX INFORMATION SERVICES, INC., SUCH
REGISTRATION IS NOT REQUIRED).
5. Non-transferability. The Options granted hereunder shall not
be assignable or otherwise transferable other than by will or the laws of
descent and distribution. During the lifetime of the Optionee the Options shall
be exercisable and elections with respect to the Options may be made only by the
Optionee or the Optionee's guardian or legal representative.
6. Termination of Employment.
(a) Except to the extent otherwise determined by the Committee
(subject to Section 9(e) of the Plan) or as provided below or in any written
employment agreement or severance agreement between the Optionee and the
Company, upon the Optionee's termination of employment with the Company and all
subsidiaries of the Company ("Termination"), for any reason, all unvested
Options shall be canceled.
(b) In the event of the Optionee's Termination for Cause, all
vested Options shall be canceled on the date of such Termination. In addition,
in the event of the Optionee's Termination for Cause, the Company shall have the
right, but not the obligation, to purchase from such Optionee all shares of
Stock then held by the Optionee and acquired pursuant to this Grant for a
purchase price equal to the Exercise Price of the Option pursuant to which such
shares were purchased. The Company shall exercise such right by delivery of a
written notice of exercise to such Optionee not later than 60 days after the
date of such Termination. The closing of any purchase pursuant to the exercise
of such right shall occur not later than 30 days after the delivery of the
notice of exercise by the Company, at the principal executive offices of the
Company. At such closing, the Company shall pay to the Optionee or his legal
representative the total purchase price for the shares being purchased by check,
payable to the order of the Optionee or his legal representative, against
delivery by the Optionee or his legal representative of a certificate or
certificates representing all of the shares being purchased, together with a
stock power duly executed in blank with signature guaranteed, free and clear of
all liens, claims, charges and encumbrances.
- 2 -
<PAGE> 22
(c) In the event of the Optionee's voluntary Termination, the
Options which are then vested and exercisable may be exercised in whole or in
part at any time prior to the earlier of the Expiration Date and the date 30
days after the date of such Termination.
(d) In the event of the Optionee's Termination by reason of death
or Disability, the Options which are then vested and exercisable may be
exercised in whole or in part at any time prior to the earlier of the Expiration
Date and the date one year after the date of such Termination.
7. Definitions. For purposes of this Grant:
(a) "Cause" shall mean (i) the willful failure by the Optionee to
perform his or her duties as an employee of the Company (other than a failure
resulting from physical or mental disability), it being understood that no act,
or failure to act, by the Optionee shall be considered "willful" unless the
Board of Directors of the Company in the reasonable exercise of its business
judgment determines that such act or failure to act was committed without good
faith and without a reasonable belief that such act or failure to act was in the
best interests of the Company, (ii) the Optionee engaging in gross misconduct
injurious to the Company, (iii) the material breach by the Optionee of any
employment agreement or severance agreement between the Company or any affiliate
of the Company and such Optionee or (iv) the conviction or admission of guilt in
a court of law of any crime that constitutes a felony in the jurisdiction
involved; and
(b) "Disability" shall have the same meaning as the term
"permanent and total disability" under Section 22(e)(3) of the Internal Revenue
Code.
8. Governing Law. This Grant shall be governed by the laws of the
State of Delaware.
ENTEX INFORMATION SERVICES, INC.
By:
-------------------------------
Name: John A. McKenna
Title: President
- 3 -
<PAGE> 23
EXHIBIT A
INCENTIVE STOCK OPTION EXERCISE FORM
[DATE]
ENTEX Information Services, Inc.
Six International Drive
Rye Brook, New York 10573
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Incentive Stock Option
Grant dated ____________ (the "Grant"), whereby you have granted to me an
incentive stock option to purchase ___________ shares of Common Stock of ENTEX
Information Services, Inc. (the "Company"), I hereby notify you that I elect to
exercise my right to purchase ____________________ of the shares covered by such
option at the exercise price specified therein. In full payment of the exercise
price for the shares being purchased hereby, I am delivering to you herewith (a)
a check payable to the order of the Company in the amount of $_____________, or
(b) a certificate or certificates for ________ shares of Common Stock of the
Company, and which have a fair market value as of the date hereof of
$_____________, and a check, payable to the order of the Company, in the amount
of $_____________. Any such stock certificate or certificates are endorsed, or
accompanied by an appropriate stock power, to the order of the Company, with my
signature guaranteed by a bank or trust company or by a member firm of the New
York Stock Exchange. I hereby acknowledge my agreement to comply with all the
terms and conditions of the Plan, including Section 7(e) thereof. [I hereby
further acknowledge that I am purchasing these shares of Common Stock for
investment purposes only and not with a view to the resale or distribution
thereof.]
Very truly yours,
---------------------------
Print Name:
Print Address:
<PAGE> 24
ENTEX INFORMATION SERVICES, INC.
NON-QUALIFIED STOCK OPTION GRANT
THIS NON-QUALIFIED STOCK OPTION GRANT (the "Grant") is made as of
May 27, 1997 by ENTEX Information Services, Inc., a Delaware corporation (the
"Company") to _____________________ (the "Optionee") pursuant to the ENTEX
Information Services, Inc. 1996 Performance Incentive Plan (the "Plan").
Capitalized terms not defined in this Grant shall have the meanings set forth in
the Plan.
1. Award of Options. The Company hereby awards to the Optionee an
option (the "Option" or "Options") to acquire _____ shares of Company common
stock (the "Stock") at the exercise price of $10.19 per share (the "Exercise
Price"), subject to the terms and conditions set forth in this Grant and the
Plan (including Section 7(e) of the Plan, which gives the Committee the power to
cancel this Option and/or demand rescission of any exercise of this Option in
the event of the Optionee's failure to comply with certain noncompetition,
confidentiality and intellectual property covenants contained therein). In the
event of a conflict between the terms of this Grant and the Plan, the Plan shall
control. The Options granted hereunder are non-qualified stock options.
2. Vesting Schedule. Subject to Section 6 hereof, the Options
shall vest and become exercisable at the rate of 20% per year from and after
each anniversary of __________, 199__. Any acceleration of vesting due to death,
Disability, change in control or otherwise shall be at the sole discretion of
the Committee.
3. Expiration Date. Subject to Section 6 hereof, the Options
shall expire on May 27, 2007 (the "Expiration Date").
4. Exercise of Options. To the extent vested, the Options may be
exercised from time to time by the giving of written notice of exercise to the
Company in the form attached hereto as Exhibit A, specifying the number of
shares to be purchased. The Exercise Price shall be tendered to the Company at
the time of exercise in cash or in Stock or in such other consideration as shall
be permitted by the Committee at the time of exercise, in each case having a
total Fair Market Value determined as of the date of exercise equal to the
Exercise Price, or a combination of cash, Stock and such other consideration
having a total Fair Market Value equal to such Exercise Price. If requested by
the Company at the time of any exercise, the Optionee agrees as a condition to
such exercise to provide the Company with a representation that it is the
Optionee's intention at the time of such exercise to acquire the shares being
purchased for his or her own account for investment and not with a view to, or
for resale in connection with, the distribution thereof within the meaning of
the Securities Act of 1933. The Stock issued upon exercise of the Option shall
bear the following legend if required by the Company:
- 1 -
<PAGE> 25
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN A
NON-QUALIFIED STOCK OPTION GRANT MADE TO THE HOLDER HEREOF
BY ENTEX INFORMATION SERVICES, INC. AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNTIL (I) ALL OF SUCH RESTRICTIONS HAVE EXPIRED OR HAVE
BEEN WAIVED BY ENTEX INFORMATION SERVICES, INC. AND (II)
SUCH SHARES HAVE FIRST BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (UNLESS, IN THE OPINION
OF COUNSEL FOR ENTEX INFORMATION SERVICES, INC., SUCH
REGISTRATION IS NOT REQUIRED).
5. Non-transferability. Except to the extent otherwise determined
by the Committee, the Options granted hereunder shall not be assignable or
otherwise transferable other than by will or the laws of descent and
distribution. Unless otherwise provided by the Committee, during the lifetime of
the Optionee the Options shall be exercisable and elections with respect to the
Options may be made only by the Optionee or the Optionee's guardian or legal
representative.
6. Termination of Employment.
(a) Except to the extent otherwise determined by the Committee
(subject to Section 9(e) of the Plan) or as provided below or in any written
employment agreement or severance agreement between the Optionee and the
Company, upon the Optionee's termination of employment with the Company and all
subsidiaries of the Company ("Termination"), for any reason, all unvested
Options shall be canceled.
(b) In the event of the Optionee's Termination for Cause, all
vested Options shall be canceled on the date of such Termination. In addition,
in the event of the Optionee's Termination for Cause, the Company shall have the
right, but not the obligation, to purchase from such Optionee all shares of
Stock then held by the Optionee and acquired pursuant to this Grant for a
purchase price equal to the Exercise Price of the Option pursuant to which such
shares were purchased. The Company shall exercise such right by delivery of a
written notice of exercise to such Optionee not later than 60 days after the
date of such Termination. The closing of any purchase pursuant to the exercise
of such right shall occur not later than 30 days after the delivery of the
notice of exercise by the Company, at the principal executive offices of the
Company. At such closing, the Company shall pay to the Optionee or his legal
representative the total purchase price for the shares being purchased by check,
payable to the order of the Optionee or his legal representative, against
delivery by the Optionee or his legal representative of a certificate or
certificates representing all of the shares being purchased, together with a
stock power duly executed in blank with signature guaranteed, free and clear of
all liens, claims, charges and encumbrances.
- 2 -
<PAGE> 26
(c) In the event of the Optionee's voluntary Termination, the
Options which are then vested and exercisable may be exercised in whole or in
part at any time prior to the earlier of the Expiration Date and the date 30
days after the date of such Termination.
(d) In the event of the Optionee's Termination by reason of death
or Disability, the Options which are then vested and exercisable may be
exercised in whole or in part at any time prior to the earlier of the Expiration
Date and the date one year after the date of such Termination.
7. Definitions. For purposes of this Grant:
(a) "Cause" shall mean (i) the willful failure by the Optionee to
perform his or her duties as an employee of the Company (other than a failure
resulting from physical or mental disability), it being understood that no act,
or failure to act, by the Optionee shall be considered "willful" unless the
Board of Directors of the Company in the reasonable exercise of its business
judgment determines that such act or failure to act was committed without good
faith and without a reasonable belief that such act or failure to act was in the
best interests of the Company, (ii) the Optionee engaging in gross misconduct
injurious to the Company, (iii) the material breach by the Optionee of any
employment agreement or severance agreement between the Company or any affiliate
of the Company and such Optionee or (iv) the conviction or admission of guilt in
a court of law of any crime that constitutes a felony in the jurisdiction
involved; and
(b) "Disability" shall have the same meaning as the term
"permanent and total disability" under Section 22(e)(3) of the Internal Revenue
Code.
8. Withholding Tax. The Optionee may be subject to withholding
taxes as a result of the exercise or settlement of an Option or other payment in
respect of an Option. Unless the Committee permits otherwise, the Optionee shall
pay to the Company in cash all applicable federal, state, local and foreign
withholding taxes that the Company in its discretion determines result from each
such exercise, settlement or payment. Unless the Committee otherwise determines
and subject to such rules and procedures as the Committee may establish, the
Optionee may make an election to have shares of Stock withheld by the Company or
to tender any such securities to the Company to pay the amount of tax that the
Company in its discretion determines to be required to be withheld by the
Company upon exercise of an Option. Any shares or other securities so withheld
or tendered shall be valued at Fair Market Value on such date. Unless otherwise
permitted by the Committee, the value of the shares withheld or tendered may not
exceed the required federal, state, local and foreign withholding tax
obligations as computed by the Company.
- 3 -
<PAGE> 27
9. Governing Law. This Grant shall be governed by the laws of the
State of Delaware.
ENTEX INFORMATION SERVICES, INC.
By:
-------------------------------
Name: John A. McKenna
Title: President
- 4 -
<PAGE> 28
EXHIBIT A
NON-QUALIFIED STOCK OPTION EXERCISE FORM
[DATE]
ENTEX Information Services, Inc.
Six International Drive
Rye Brook, New York 10573
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Non-Qualified Stock Option
Grant dated May 27, 1997 (the "Grant"), whereby you have granted to me a
non-qualified stock option to purchase ___________ shares of Common Stock of
ENTEX Information Services, Inc. (the "Company"), I hereby notify you that I
elect to exercise my right to purchase ____________________ of the shares
covered by such option at the exercise price specified therein. In full payment
of the exercise price for the shares being purchased hereby, I am delivering to
you herewith (a) a check payable to the order of the Company in the amount of
$_____________,* or (b) a certificate or certificates for ____________ shares of
Common Stock of the Company, and which have a fair market value as of the date
hereof of $_____________, and a check, payable to the order of the Company, in
the amount of $_____________.** Any such stock certificate or certificates are
endorsed, or accompanied by an appropriate stock power, to the order of the
Company, with my signature guaranteed by a bank or trust company or by a member
firm of the New York Stock Exchange. I hereby acknowledge my agreement to comply
with all the terms and conditions of the Plan, including Section 7(e) thereof.
[I hereby further acknowledge that I am purchasing these shares of Common Stock
for investment purposes only and not with a view to the resale or distribution
thereof.]
Very truly yours,
---------------------------
Print Name:
Print Address:
- --------
* $________ of this amount is the purchase price of the shares, and the
balance represents payment of withholding taxes as follows: Federal
$___________, State $____________ and Local $_________.
** $________ of this amount is the remaining purchase price of the shares, and
the balance represents payment of withholding taxes as follows: Federal
$_________, State $______ and Local $_______.
<PAGE> 29
ENTEX INFORMATION SERVICES, INC.
PERFORMANCE STOCK OPTION GRANT
THIS PERFORMANCE STOCK OPTION GRANT (the "Grant") is made as of _______,
1997 by ENTEX Information Services, Inc., a Delaware corporation (the "Company")
to _________________ (the "Optionee") pursuant to the ENTEX Information
Services, Inc. 1996 Performance Incentive Plan (the "Plan"). Capitalized terms
not defined in this Grant shall have the meanings set forth in the Plan.
1. Award of Options. The Company hereby awards to the Optionee an option
(the "Option" or "Options") to acquire ______ shares of Company common stock
(the "Stock") at the exercise price of $_____ per share (the "Exercise Price"),
subject to the terms and conditions set forth in this Grant and the Plan
(including Section 7(e) of the Plan, which gives the Committee the power to
cancel this Option and/or demand rescission of any exercise of this Option in
the event of the Optionee's failure to comply with certain noncompetition,
confidentiality and intellectual property covenants contained therein). In the
event of a conflict between the terms of this Grant and the Plan, the Plan shall
control. The Options granted hereunder are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code to
the maximum extent permitted by law.
2. Vesting Schedule. Subject to Section 6 hereof, the Options shall vest
and become 100% exercisable on ___________________. Any acceleration of vesting
due to death, Disability, change in control or otherwise shall be at the sole
discretion of the Committee. Notwithstanding the foregoing, the Options shall
vest and become exercisable, subject to Section 6 hereof, on a cumulative
accelerated basis as set forth below in the event the Third-Party Market Value
equals or exceeds the following:
<TABLE>
<CAPTION>
Third-Party Cumulative
Market Value Accelerated Vesting Rate
------------ ------------------------
<S> <C>
</TABLE>
The Third-Party Market Values listed above may be adjusted by the Committee, in
such manner as it may deem equitable, in the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that an adjustment is determined by the Committee to be appropriate. Any
accelerated vesting of the Options that would occur by virtue of achieving a
Third-Party Market Value in connection with a merger, liquidation or other
transaction following which the Stock would no longer be outstanding shall be
deemed to occur immediately prior to such merger, liquidation or other
transaction, and the
<PAGE> 30
Optionee may elect to exercise the Option on a conditional basis subject to
consummation of such merger, liquidation or other transaction.
3. Expiration Date. Subject to Section 6 hereof, the Options shall
expire on ____________ (the "Expiration Date").
4. Exercise of Options. To the extent vested, the Options may be
exercised from time to time by the giving of written notice of exercise to the
Company in the form attached hereto as Exhibit A, specifying the number of
shares to be purchased. The Exercise Price shall be tendered to the Company at
the time of exercise in cash or in Stock or in such other consideration as shall
be permitted by the Committee at the time of exercise, in each case having a
total Fair Market Value determined as of the date of exercise equal to the
Exercise Price, or a combination of cash, Stock and such other consideration
having a total Fair Market Value equal to such Exercise Price. If requested by
the Company at the time of any exercise, the Optionee agrees as a condition to
such exercise to provide the Company with a representation that it is the
Optionee's intention at the time of such exercise to acquire the shares being
purchased for his or her own account for investment and not with a view to, or
for resale in connection with, the distribution thereof within the meaning of
the Securities Act of 1933. The Stock issued upon exercise of the Option shall
bear the following legend if required by the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN A PERFORMANCE STOCK
OPTION GRANT MADE TO THE HOLDER HEREOF BY ENTEX
INFORMATION SERVICES, INC. AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNTIL (I) ALL OF SUCH RESTRICTIONS HAVE EXPIRED OR HAVE
BEEN WAIVED BY ENTEX INFORMATION SERVICES, INC. AND (II)
SUCH SHARES HAVE FIRST BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (UNLESS, IN THE OPINION
OF COUNSEL FOR ENTEX INFORMATION SERVICES, INC., SUCH
REGISTRATION IS NOT REQUIRED).
5. Non-transferability. The Options granted hereunder shall not be
assignable or otherwise transferable other than by will or the laws of descent
and distribution. During the lifetime of the Optionee the Options, shall be
exercisable and elections with respect to the Options may be made only by the
Optionee or the Optionee's guardian or legal representative.
6. Termination of Employment. (a) Except to the extent otherwise
determined by the Committee (subject to Section 9(e) of the Plan) or as provided
below or in any written employment agreement or severance agreement between the
Optionee and the Company, upon the Optionee's termination of employment with the
Company and all subsidiaries of the Company ("Termination"), for any reason, all
unvested Options shall be canceled.
<PAGE> 31
(b) In the event of the Optionee's Termination for Cause, all vested
Options shall be canceled on the date of such Termination. In addition, in the
event of the Optionee's Termination for Cause, the Company shall have the right,
but not the obligation, to purchase from such Optionee all shares of Stock then
held by the Optionee and acquired pursuant to this Grant for a purchase price
equal to the Exercise Price of the Option pursuant to which such shares were
purchased. The Company shall exercise such right by delivery of a written notice
of exercise to such Optionee not later than 60 days after the date of such
Termination. The closing of any purchase pursuant to the exercise of such right
shall occur not later than 30 days after the delivery of the notice of exercise
by the Company, at the principal executive offices of the Company. At such
closing, the Company shall pay to the Optionee or his legal representative the
total purchase price for the shares being purchased by check, payable to the
order of the Optionee or his legal representative, against delivery by the
Optionee or his legal representative of a certificate or certificates
representing all of the shares being purchased, together with a stock power duly
executed in blank with signature guaranteed, free and clear of all liens,
claims, charges and encumbrances.
(c) In the event of the Optionee's voluntary Termination, the Options
which are then vested and exercisable may be exercised in whole or in part at
any time prior to the earlier of the Expiration Date and the date 30 days after
the date of such Termination.
(d) In the event of the Optionee's Termination by reason of death or
Disability, the Options which are then vested and exercisable may be exercised
in whole or in part at any time prior to the earlier of the Expiration Date and
the date one year after the date of such Termination.
7. Definitions. For purposes of this Grant:
(a) "Cause" shall mean (i) the willful failure by the Optionee to
perform his or her duties as an employee of the Company (other than a failure
resulting from physical or mental disability), it being understood that no act,
or failure to act, by the Optionee shall be considered "willful" unless the
Board of Directors of the Company in the reasonable exercise of its business
judgment determines that such act or failure to act was committed without good
faith and without a reasonable belief that such act or failure to act was in the
best interests of the Company, (ii) the Optionee engaging in gross misconduct
injurious to the Company, (iii) the material breach by the Optionee of any
employment agreement or severance agreement between the Company or any affiliate
of the Company and such Optionee or (iv) the conviction or admission of guilt in
a court of law of any crime that constitutes a felony in the jurisdiction
involved; and
(b) "Disability" shall have the same meaning as the term "permanent
and total disability" under Section 22(e)(3) of the Internal Revenue Code.
(c) "Third-Party Market Value" shall mean (i) the amount of cash and
fair market value of property (as determined in good faith by the Committee)
that is the highest price per share of Company common stock (A) paid in any
transaction in which a "person" (as defined in Section 3(a)(9) of the Exchange
Act, including a "group" as defined in Section 13(d) thereof) other than Dort A.
Cameron III or his affiliates becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), by purchase,
<PAGE> 32
merger or otherwise, of more than 50% of the then outstanding shares of Company
common stock or (B) distributed in any liquidation of shares of Company common
stock following a sale of substantially all the assets of the Company; or (ii)
following the date on which shares of Company common stock are traded on a
national securities exchange or quoted on an automated quotation system, the
closing price per share (or if closing prices are not quoted, the average of any
day's high and low trading prices) reported on a consolidated basis for shares
of Company common stock listed on the principal stock exchange or market on
which such shares are then traded.
8. Withholding Tax. The Optionee may be subject to withholding taxes
as a result of the exercise or settlement of an Option or other payment in
respect of an Option. Unless the Committee permits otherwise, the Optionee shall
pay to the Company in cash all applicable federal, state, local and foreign
withholding taxes that the Company in its discretion determines result from each
such exercise, settlement or payment. Unless the Committee otherwise determines
and subject to such rules and procedures as the Committee may establish, the
Optionee may make an election to have shares of Stock withheld by the Company or
to tender any such securities to the Company to pay the amount of tax that the
Company in its discretion determines to be required to be withheld by the
Company upon exercise of an Option. Any shares or other securities so withheld
or tendered shall be valued at Fair Market Value on such date. Unless otherwise
permitted by the Committee, the value of the shares withheld or tendered may not
exceed the required federal, state, local and foreign withholding tax
obligations as computed by the Company.
9. Governing Law. This Grant shall be governed by the laws of the
State of Delaware.
ENTEX INFORMATION SERVICES, INC.
By:
------------------------------
Name: John A. McKenna
Title: President
<PAGE> 33
EXHIBIT A
PERFORMANCE STOCK OPTION EXERCISE FORM
--------------------------------------
[DATE]
ENTEX Information Services, Inc.
Six International Drive
Rye Brook, New York 10573
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Performance Stock Option Grant dated
_______________________ (the "Grant"), whereby you have granted to me an option
to purchase 76,000 shares of Common Stock of ENTEX Information Services, Inc.
(the "Company"), I hereby notify you that I elect to exercise my right to
purchase _______________________ of the shares covered by such option at the
exercise price specified therein. [I further elect to have my purchase of such
shares treated as the exercise of an "incentive stock option" (as defined in
Section 422 of the Internal Revenue Code) to the maximum extent permitted by
law.] In full payment of the exercise price for the shares being purchased
hereby, I am delivering to you herewith (a) a check payable to the order of the
Company in the amount of $________________,* or (b) a certificate or
certificates for______________ shares of Common Stock of the Company, and which
have a fair market value as of the date hereof of $_____________________, and a
check, payable to the order of the Company, in the amount of
$_________________,** Any such stock certificate or certificates are endorsed,
or accompanied by an appropriate stock power, to the order of the Company, with
my signature guaranteed by a bank or trust company or by a member firm of the
New York Stock Exchange. I hereby acknowledge my agreement to comply with all
the terms and conditions of the Plan, including Section 7(e) thereof. [I hereby
further acknowledge that I am purchasing these shares of Common Stock for
investment purposes only and not with a view to the resale or distribution
thereof.]
Very truly yours,
--------------------------------
Print Name:
Print Address:
- ------------------------
*
$________________ of this amount is the purchase price of the shares,
and the balance represents payment of withholding taxes as follows: Federal
$_________, State $___________, and Local $__________.
**
$_______________ of this amount is the remaining purchase price of the shares,
and the balance represents payment of withholding taxes as follows: Federal
$________,State $_______________ and Local $_____________.
